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Economic Impact Analysis (EIA) for the Manganese Ferroalloys RTR
Final Report
EPA-452/R-15-004
May 2015
Economic Impact Analysis (EIA) for the Manganese Ferroalloys RTR
By: Larry
Sorrels
U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS)
Health and Environmental Impacts Division (HEID) Air
Economics Group (AEG)
Research Triangle Park, NC 27711
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Research Triangle Park, North Carolina
CONTENTS
Section Page
Section 1 Executive Summary............................................................................................... 1-1
1.1 Analysis Summary............................................................................................... 1-1
1.2 Organization of this Report.................................................................................. 1-2
Section 2 Introduction............................................................................................................ 2-3
2.1 Background for Rule............................................................................................ 2-3
2.1.1 What is this source category and how did the MACT regulate its
HAP emissions? ....................................................................................... 2-3
2.1.2 What data collection activities were conducted to support this
action?...........................................................................................2-6
2.1.3 Technology Review ................................................................................. 2-7
2.2 Options for Current Rule ..................................................................................... 2-9
Section 3 Industry Profile ...................................................................................................... 3-1
3.1 Background .......................................................................................................... 3-1
3.2 Manufacturing Process……………………………………………………...3-3
3.3 Substitute Products and Related Issues……………………………………..3-8
3.3.1 Substitutability Issues……………………………………………………… 3-8
3.4 Elasticity Estimates…………………………………………………………3-1
3.4.1 U.S. Supply Elasticity………………………………………………. 3-9
3.4.2 U.S. Demand Elasticity………………………………………………. 3-9
3.4.3 Substitution Elasticity………………………………………………. 3-9
3.5 Raw Material Costs…………………………………………………………3-10
3.6 Current Operations at U.S. Ferroalloy Producers ………………………….3-10
3.7 National Defense Stockpiles for Raw Materials.. ………………………….3-13
3
Section 4 Baseline Emissions, Emission Reductions, And Costs.......................................... 4-1
4.1 Introduction.......................................................................................................... 4-1
4.2 Summary of Cost Estimates and Emissions Reductions For The Regulatory
Options Considered For Final Rule …………………………………………….4-1
4.3 Regulatory Options Considered for the Final
Rule……………………………………………………………………4-1
4.3.1 Furnace Stack Emissions – Metal HAP…………………………………4-1
4.3.2 Furnace Stack Emissions Control Options……………………………...4-1
4.4 Methodology for Estimating Control Costs…………………………………….4-6
4.4.1 Option 1 - Enhanced Fugitive Capture…………………………………………4-6
4.4.2 Option 2 - Building Ventilation ………………………………………………..4-9
4.5 Mercury Control Options ..................................................................................... 4-1
4.5.1 Background………………………………………………………………..4-9
4.5.2 Methodology for Estimating Costs of Mercury Reductions at Ferroalloy
Facilities………………………………………………………………….4-10
4.6 Costs of Digital Opacity Compliance System
(DCOS)……….…………………………...…………………………………...4-16
4.7 Costs for Bag Leak Sensors (BLS)…………………………………………….4-17
4.8 Summary of Total Cost of Final Rule by Facility……………………………..4-18
Section 5 Economic Impact Analysis and Statutory and Executive Order Analyses ..............19
5.1 Background ............................................................................................................19
5.2 Regulatory Flexibility Act .....................................................................................19
5.3 Economic Impacts..................................................................................................20
4
5.4 Energy Impacts ......................................................................................................27
5.5 Unfunded Mandates Reform Act ...........................................................................27
5.5.1 Future and Disproportionate Costs ..............................................................27
5.5.2 Effects on the National Economy ..............................................................28
5.6 Executive Order 13045: Protection of Children from Environmental
Health Risks and Safety Risks ...............................................................................28
5.7 Executive Order 12898: Federal Actions to Address Environmental Justice
in Minority Populations and Low-Income Populations .........................................29
5.8 Employment Impact Analysis…………………………………………………5-11
5.8.1 Employment Impacts Within the Regulated Sector…………………….5-13
Section 6 References For EIA..................................................................................................34
5
SECTION 1
EXECUTIVE SUMMARY
The U.S. Environmental Protection Agency (EPA) has prepared final amendments to the
national emissions standards for hazardous air pollutants (NESHAP) for Ferroalloys Production
to address the results of the residual risk and technology review that EPA is required to conduct
by the Clean Air Act. This final rule is to be signed under a court-order on May 28, 2015. These
amendments include revisions to existing particulate matter standards for electric arc furnaces,
metal oxygen refining process, and crushing and screening operations. The amendments add
hydrochloric acid, polycyclic aromatic hydrocarbons, and formaldehyde emission limits to
electric arc furnaces. The amendments also expand and revise the requirements to control
process fugitive emissions from furnace operations and casting. Other requirements related to
testing, monitoring, notification, recordkeeping, and reporting requirements are included.
This is not an economically significant rule as defined by Executive Order 12866 and
13563 since the annual effects, either benefits or costs, are not estimated to potentially exceed
$100 million. Therefore, EPA is not required to develop a regulatory impact analysis (RIA) as
part of the regulatory process. EPA has prepared an economic impact analysis (EIA) for this final
rule, however, and includes documentation for the methods and results.
1.1 Analysis Summary
The key results of the EIA are as follows:
Engineering Cost Analysis: EPA estimates the final NESHAP’s total annualized
costs will be $7.7 million ($2012). This estimate includes all of the compliance
costs for expected controls on all affected hazardous air pollutants (HAP), with
both control and administrative (monitoring, testing) costs and costs of additional
ductwork and fans included. These costs primarily reflect the costs to install and
operate controls to reduce process fugitive emissions of HAP metals (e.g.,
manganese, nickel, cadmium) that are necessary to reduce risks, and reflect the
MACT floor level of control for HAP emissions from the furnace stacks. EPA
estimates the total capital cost of the final rule to be about $40.3 million.
Economic Impact Analysis: The economic impacts for the firms affected by the
final rule include annual compliance costs of approximately 1.9 percent of sales,
and a potential 10.4 percent reduction in output. Thus, consumers will experience
moderate increases in the price of affected domestic ferroalloy output, using
annual compliance costs as a percent of sales as a proxy for price increases, and
there will be some reduction in domestic ferroalloy demand assuming all other
factors constant.
1-1
Social Cost Analysis: The estimated social cost of this final rule will be $7.7
million, which is also the total annualized cost of compliance ($2012).
Small Entity Analyses: Neither of the two affected firms are small businesses
according to the Small Business Administration’s (SBA’s) small business size
standard for this industry. The small business size standard for the ferroalloy
manufacturing industry is 1,000 employees for an ultimate parent company.
Thus, there are no small business or entity impacts associated with this rule.
1.2 Organization of this Report
The remainder of this report supports and details the methodology and the results of the
EIA:
Section 2 describes the final rule.
Section 3 presents the profile of the affected industry.
Section 4 describes the baseline emissions, emission reductions, and costs for options
considered in the final rule.
Section 5 describes the economic impacts and analyses to comply with Statutory and
Executive Order requirements.
Section 6 contains the references for the EIA.
1-2
SECTION 2
INTRODUCTION
2.1 Background for Rule
This action supplements our amendments to the national emission standards for
hazardous air pollutants for the ferroalloys production source category published in the
Federal Register on November 23, 2011 (76 FR 72508). In that action, the EPA proposed
amendments under section 112(d)(6) and (f)(2) of the Clean Air Act. Specifically, this
action presents a new technology review and a new residual risk analysis for the
ferroalloys production source category and finalizes revisions to the standards based on
those reviews. This action also finalizes new compliance requirements to meet the
revised standards.
2.1.1 What is this source category and how did the MACT regulate its HAP
emissions?
The NESHAP (or MACT rule) for Ferroalloys Production: Ferromanganese and
Silicomanganese was promulgated on May 20, 1999 (64 FR 27450) and codified at 40
CFR part 63, subpart XXX.1 The 1999 NESHAP (40 CFR 63.1650(a)) applies to all new
and existing ferroalloys production facilities that manufacture ferromanganese or
silicomanganese and are major sources or are co-located at major sources of HAP
emissions. The rule’s product-specific applicability reflected the only known major
source at the time of promulgation. Since then, one other producer of silicomanganese
has started production.
Today, there are two ferroalloys production facilities that are subject to the
MACT rule. The ferroalloys products that are the focus of the NESHAP are
ferromanganese (FeMn) and silicomanganese (SiMn), which are produced by two
facilities in the United States. One facility (Eramet) is located in Ohio and produces both
FeMn and SiMn. The other plant (Felman) is located in West Virginia and produces only
SiMn.
1 The emission limits were revised on March 22, 2001 (66 FR 16024) in response to a petition for
reconsideration submitted to EPA following promulgation of the final rule, and a petition for review
filed in the U.S. Court of Appeals for the District of Columbia Circuit.
2-1
No new ferroalloys production facilities have been built in over 20 years, and we
anticipate no new ferroalloys production facilities in the foreseeable future, although one
facility is currently exploring expanding operations.
Ferroalloys are alloys of iron in which one or more chemical elements (such as
chromium, manganese, and silicon) are added into molten metal. Ferroalloys are
consumed primarily in iron and steel making and are used to produce steel and cast iron
products with enhanced or special properties.
Ferroalloys within the scope of this source category are produced using
submerged electric arc furnaces, which are furnaces in which the electrodes are
submerged into the charge. The submerged arc process is a reduction smelting operation.
The reactants consist of metallic ores (ferrous oxides, silicon oxides, manganese oxides,
etc.) and a carbon-source reducing agent, usually in the form of coke, charcoal, high- and
low-volatility coal, or wood chips. Raw materials are crushed and sized and then
conveyed to a mix house for weighing and blending. Conveyors, buckets, skip hoists, or
cars transport the processed material to hoppers above the furnace. The mix is gravity-fed
through a feed chute either continuously or intermittently, as needed. At high
temperatures in the reaction zone, the carbon source reacts with metal oxides to form
carbon monoxide and to reduce the ores to base metal.2 The molten material (product and
slag) is tapped from the furnace, sometimes subject to post-furnace refining, and poured
into casting beds on the furnace room floor. Once the material hardens, it is transported to
product crushing and sizing systems and packaged for transport to the customer.
HAP generating processes include electrometallurgical (furnace) operations
(primary and tapping), other furnace room operations (ladle treatment and casting),
building fugitives, raw material handling and product handling. HAP are emitted from
ferroalloys production as process emissions, process fugitive emissions, and outdoor
fugitive dust emissions.
Process emissions are the exhaust gases from the control devices, primarily the
furnace control device, metal oxygen refining control device and crushing operations
control device. The HAP in process emissions are primarily composed of metals (mostly
manganese, arsenic, nickel, lead and chromium) and also may include organic
2 U.S. Environmental Protection Agency. AP-42, 12.4. Ferroalloy Production. October 1986.
compounds that result from incomplete combustion of coal or coke that is charged to the
furnaces as a reducing agent. There is also evidence of mercury emissions. There are
process metal HAP emissions from the product crushing control devices. Process fugitive
emissions occur at various points during the smelting process (such as during charging
and tapping of furnaces and casting) and are assumed to be similar in composition to the
process emissions. Outdoor fugitive dust emissions result from the entrainment of HAP
in ambient air due to material handling, vehicle traffic, wind erosion from storage piles,
and other various activities. Outdoor fugitive dust emissions are composed of metal HAP
only.
The MACT rule applies to process emissions and process fugitive emissions from
the submerged arc furnaces, the metal oxygen refining process, and the product crushing
equipment and outdoor fugitive dust emissions sources such as roadways, yard areas, and
outdoor material storage and transfer operations. For process sources, the NESHAP
specifies numerical emissions limits for particulate matter (as a surrogate for metal HAP)
from the electric (submerged) arc furnaces (including primary and tapping emissions),
depending on furnace type, size, and product being made. Particulate matter emission
limits (again as a surrogate for metal HAP) are also in place for the metal oxygen refining
process and product crushing and screening equipment. Table 2-1 contains a summary of
the applicable limits.
Table 2-1. Emission Limits in Subpart XXX
New or Reconstructed
or Existing Source
Affected Source Applicable PM Emission
Standards
Subpart XXX
Reference
New or reconstructed Submerged arc furnace 0.23 kilograms per hour per
megawatt (kb/hr/MW) (0.51
pounds per hour per
megawatt (lb/hr/MW) or 35
milligrams per dry standard
cubic meter (mg/dscm) (0.015
grains per dry standard cubic
foot (gr/dscf)
40 CFR
63.1652(a)(1) and
(a)(2)
Existing Open submerged arc furnace producing
ferromanganese and operating at a furnace
power input of 22 MW or less
9.8 kg/hr (21.7 lb/hr) 40 CFR
63.1652(b)(1)
Existing Open submerged arc furnace producing
ferromanganese and operating at a furnace
power input greater than 22 MW
13.5 kg/hr (29.8 lb/hr) 40 CFR
63.1652(b)(2)
2-1
New or Reconstructed
or Existing Source
Affected Source Applicable PM Emission
Standards
Subpart XXX
Reference
Existing Open submerged arc furnace producing
silicomanganese and operating at a furnace
power input greater than 25 MW
16.3 kg/hr (35.9 lb/hr) 40 CFR
63.1652(b)(3)
Existing Open submerged arc furnace producing
silicomanganese and operating at a furnace
power input of 25 MW or less
12.3 kg/hr (27.2 lb/hr) 40 CFR
63.1652(b)(4)
Existing Semi-sealed submerged arc furnace
(primary, tapping, and vent stacks)
producing ferromanganese
11.2 kg/hr (24.7 lb/hr) 40 CFR 63.1652(c)
New, reconstructed, or
existing
Metal oxygen refining process 69 mg/dscm (0.03 gr/dscf) 40 CFR 63.1652(d)
New or reconstructed Individual equipment associated with the
product crushing and screening operation
50 mg/dscm (0.022 gr/dscf) 40 CFR
63.1652(e)(1)
Existing Individual equipment associated with the
product crushing and screening operation
69 mg/dscm (0.03 gr/dscf) 40 CFR
63.1652(e)(2)
The 1999 NESHAP established a building opacity limit of 20 percent that is measured
during the required furnace control device performance test. The rule provides an excursion limit
of 60 percent opacity for one 6-munute period during the performance test. The opacity
observation is focused only on emissions exiting the shop due solely to operations of any
affected submerged arc furnace. In addition, blowing taps, poling and oxygen lancing of the tap
hole; burndowns associated with electrode measurements; and maintenance activities associated
with submerged arc furnaces and casting operations are exempt from the opacity standards
specified in §63.1653.
For outdoor fugitive dust sources, as defined in §63.1651, the 1999 NESHAP requires
that plants prepare and operate according to an outdoor fugitive dust control plan that describes
in detail the measures that will be put in place to control outdoor fugitive dust emissions from the
individual outdoor fugitive dust sources at the facility. The owner or operator must submit a copy
of the outdoor fugitive dust control plan to the designated permitting authority on or before the
applicable compliance date.
2.1.1.1 History of RTR Development Up to the Present
Pursuant to section 112(f)(2) of the Clean Air Act, we evaluated the residual risk
associated with the Ferroalloys Production NESHAP in 2011. We also conducted a technology
review, as required by section 112(d)(6) of the Clean Air Act. We also reviewed the 1999 MACT
rule to determine if other amendments were appropriate. Based on the results of that previous
residual risk and technology review, and the MACT rule review, we proposed amendments to
subpart XXX on November 23, 2011 (76 FR 72508) (referred to herein out as the 2011
proposal). The proposed amendments in the 2011 proposal which we have revisited in today’s
rulemaking included the following:
proposed revisions to particulate matter standards for electric arc furnaces and local
ventilation control devices;
emission limits for hydrochloric acid (HCl), mercury, and polycyclic aromatic
hydrocarbons (PAHs);
proposed requirements to control process fugitive emissions based on full-building
enclosure with negative pressure, or fenceline monitoring as an alternative; and
a provision for emissions averaging.
In today’s Notice of Final Rulemaking we present revised analyses, and based on those
analyses we are revising amendments for the items listed above to allow the public an
opportunity to review and comment on these revised analyses and revised amendments.
The comment period for the November 2011 proposal opened on November 23, 2011 and
ended on January 31, 2012. We have addressed the comments we received during the public
comment period for the 2011 proposal in this final action. Responses to comments are found in
the final preamble and in the response to comments (RTC) document.
2.1.2 What data collection activities were conducted to support this action?
Commenters on the 2011 proposal expressed concern that the data set used in the risk
assessment did not adequately reflect current operations at the plants. In response to these
comments, we worked with the facilities to address these concerns, and we have obtained a much
more robust data set than the one available to us at proposal. Specifically, the plants provided
data collected during their ongoing compliance tests in fall 2012. Then, in response to an
Information Collection Request (ICR) from the EPA in December 2012, they conducted more
tests in the spring of 2013. This combined testing effort provided the following data:
Additional stack test data for arsenic, cadmium, chromium, lead, manganese, mercury,
nickel, HCl, formaldehyde, PAH, polychlorinated biphenyls (PCB), and dioxins/furans;
Test data collected using updated, state-of-the-art test methods and procedures;
Hazardous air pollutant (HAP) test data for all operational furnaces;
Test data obtained during different seasonal conditions (i.e., spring and fall);
Test data for both products (ferromanganese and silicomanganese) for both furnaces at
Eramet (Felman only produces silicomanganese).
We believe that the current data set is significantly better than the data set we relied on in
the 2011 proposal. With the new data, we do not have to extrapolate HAP emissions from a ratio
of particulate matter to HAP emissions from just one or two tested furnaces. We are also using
test data collected using test methods that we believe, in some cases, are more appropriate and
provide better QA/QC of the test results. For mercury, test data was collected for the
supplemental proposal using EPA Method 30B, which requires paired samples collected for each
test run, in addition to a spiked sample during the 3-run test. Test data for PAH were collected
using CARB 429, which uses higher resolution and greater sensitivity analytical procedures to
determine concentration of the PAH compounds. We also received PCB and dioxin/furan test
data that was collected using CARB 428, which also uses higher resolution and greater
sensitivity analytical procedures to determine the concentration of the organic compounds.
Commenters also expressed concern that the estimated cost and operational impacts of the
proposed process fugitive standards based on use of a total building enclosure requirement were
significantly underestimated. In their comments both companies submitted substantial additional
information and estimates regarding the elements, costs and impacts involved with constructing
and operating a full building enclosure for their facilities. Furthermore, in their comments, and in
subsequent meetings and other communications, the companies also provided design and cost
information for an alternative approach to substantially reduce fugitive emissions based on
enhanced local capture and control of these emissions at each plant. In the summer of
2012 and fall of 2013, both plants submitted updated enhanced capture plans and cost estimates
to implement those plans. We also consulted with outside ventilation experts and control
equipment vendors to re-evaluate the costs of process fugitive capture as well as other control
device costs such as activated carbon injection. We also gathered a substantial amount of opacity
data from both facilities, and collected additional information regarding the processes, control
technologies, and modeling input parameters (such as stack release heights and fugitive
emissions release characteristics). We reviewed and evaluated all the data and information
provided by the facilities, the ventilation experts and venders, and revised our analyses
accordingly.
2.1.3 Technology Review
Our technology review focused on the identification and evaluation of developments in
practices, processes and control technologies that have occurred since the 1999 MACT standards
were promulgated. Where we identified such developments, in order to inform our decision of
whether it is “necessary” to revise the emissions standards, we analyzed the technical feasibility
of applying these developments, and the estimated costs, energy implications, non-air
environmental impacts, as well as considering the emission reductions. We also considered the
appropriateness of applying controls to new sources versus retrofitting existing sources.
Based on our analyses of the available data and information, we identified potential
developments in practices, processes and control technologies. For this exercise, we considered
any of the following to be a “development”:
Any add-on control technology or other equipment that was not identified and considered
during development of the original MACT standards.
Any improvements in add-on control technology or other equipment (that were identified
and considered during development of the original MACT standards) that could result in
additional emissions reduction.
Any work practice or operational procedure that was not identified or considered during
development of the original MACT standards.
Any process change or pollution prevention alternative that could be broadly applied to
the industry and that was not identified or considered during development of the original
MACT standards.
Any significant changes in the cost (including cost effectiveness) of applying controls
(including controls the EPA considered during the development of the original MACT
standards).
We reviewed a variety of data sources in our investigation of potential practices,
processes or controls to consider. Among the sources we reviewed were the NESHAP for
various industries that were promulgated since the MACT standards being reviewed in this
action. We reviewed the regulatory requirements and/or technical analyses associated with these
regulatory actions to identify any practices, processes and control technologies considered in
these efforts that could be applied to emission sources in the Ferroalloys production source
category, as well as the costs, non-air impacts and energy implications associated with the use of
these technologies. Additionally, we requested information from facilities regarding
developments in practices, processes or control technology. Finally, we reviewed information
from other sources, such as state and/or local permitting agency databases and industry-
supported databases.
For the 2011 proposal, our technology review focused on the identification and
evaluation of developments in practices, processes, and control technologies that have occurred
since the 1999 NESHAP was promulgated. In cases where the technology review identified
such developments, we conducted an analysis of the technical feasibility of applying these
developments, along with the estimated impacts (costs, emissions reductions, risk reductions,
etc.) of applying these developments. We then made decisions on whether it is necessary to
propose amendments to the 1999 NESHAP to require any of the identified developments. Based
on our analyses of the data and information collected by the 2010 ICR and our general
understanding of the industry and other available information on potential controls for this
industry, we identified several potential developments in practices, processes, and control
technologies.
Based on our technology review for the 2011 proposed rule, we determined that there
had been advances in emissions control measures since the Ferroalloys Production NESHAP
was originally promulgated in 1999. Based on that review, we proposed lower PM emissions
limits for the process vents because we determined that the existing add-on control devices
(baghouses and wet venture scrubbers) were achieving better control than that reflected by the
older emissions limits in the 1999 MACT rule. Furthermore, based on that previous technology
review, to reduce fugitive process emissions, in 2011 we decided to propose a requirement for
sources to enclose the furnace building, collect the fugitive emissions such that the furnace
building is maintained under negative pressure, and duct those emissions to a control device.
We proposed that approach in 2011, because at that time, we believed it represented a
technically-feasible advance in emissions control since the Ferroalloys Production NESHAP
was originally promulgated in 1999. Additional details regarding the previously-conducted
technology review can be found in the docket for this action: Memorandum: Technology
Review for Ferroalloys Production Source Category (10/27/2011) (See Docket No. EPA-HQ-
OAR-2010-0895-0044), and are discussed in the preamble to the November 2011 proposal.
However, we received significant adverse public comments regarding the proposed requirement
for full-enclosure with negative pressure. After reviewing and considering the comments and
other information regarding the costs and feasibility of full-enclosure, we determined that full-
enclosure with negative pressure may not be feasible for these facilities and would be much
more costly than what we had estimated for the 2011 proposal. Therefore we decided to
evaluate other potential approaches to reduce fugitive process emissions, such an option based
on enhanced local capture and control of the fugitive emissions, which is described in more
detail below.
We also gathered additional emissions data for the process vents. Therefore, we have up-
dated and revised our technology review for the process vent emissions and fugitive emissions
control options. For further information on the technology review, and the risk review, please
refer to the preamble for the supplemental proposal.
2.2 Options for Current Rule
The first option (Option 1) evaluated for fugitive metal HAP emissions in this document
is based on enhanced local capture and control, including primary and secondary hooding. The
second option (Option 2) is full building enclosure. The three options evaluated for mercury
emissions in this document are:
Option 1 – Propose mercury limits based on the calculated UPL (i.e., MACT Floor) for
each of the product types (silicomanganese (SiMn), ferromanganese (FeMn)).
Option 2 – Propose a beyond the floor mercury limit for FeMn production and the UPL
(i.e., MACT Floor) mercury limit for SiMn production.
Option 3 – Propose a beyond the floor mercury limit for FeMn production and for SiMn
production.
The options that are selected in this final rulemaking are Option 1 for the fugitive metal
HAP emissions and Option 1 for the mercury emissions.
It should be noted that new language on how the UPL method is addressed and explained
can be found in the preamble for this final rule.
As part of the regulatory process of preparing these standards, EPA has prepared an
economic impact analysis (EIA). This analysis includes consideration impacts to small entities as
part of compliance with the Small Business Regulatory Enforcement Fairness Act (SBREFA)
and analyses to comply with other Executive Orders.
SECTION 3
INDUSTRY PROFILE
3.1 Background
EPA has developed this industry profile to provide the reader with an understanding of
the technical and economic aspects of the industry that would be directly affected by this final
rule.
Ferroalloys are alloys of iron in which one or more chemical elements (such as
chromium, manganese, and silicon) are added into molten metal. Ferroalloys are consumed
primarily in iron and steel making and are used to produce steel and cast iron products with
enhanced or special properties. Ferroalloy manufacturing is found in NAICS 331110 (Iron and
Steel Mills and Ferroalloy Manufacturing).
Ferroalloys within the scope of this source category are produced using submerged
electric arc furnaces, which are furnaces in which the electrodes are submerged into the charge.
The submerged arc process is a reduction smelting operation. The reactants consist of metallic
ores (ferrous oxides, silicon oxides, manganese oxides, etc.) and a carbon-source reducing agent,
usually in the form of coke, charcoal, high- and low-volatility coal, or wood chips. Raw
materials are crushed and sized and then conveyed to a mix house for weighing and blending.
Conveyors, buckets, skip hoists, or cars transport the processed material to hoppers above the
furnace. The mix is gravity-fed through a feed chute either continuously or intermittently, as
needed. At high temperatures in the reaction zone, the carbon source reacts with metal oxides to
form carbon monoxide and to reduce the ores to base metal. The molten material (product and
slag) is tapped from the furnace, sometimes subject to post-furnace refining, and poured into
casting beds on the furnace room floor. Once the material hardens, it is transported to product
crushing and sizing systems and packaged for transport to the customer.
Silicomanganese, a metallic silvery ferroalloy, is composed principally of manganese,
silicon, and iron. It is produced in a number of grades and sizes. Most, but not all,
silicomanganese is manufactured and sold to ASTM International specification A 483, which
covers three grades, designated “A,” “B,” and “C” and differentiated by their silicon and carbon
contents. Most silicomanganese produced and sold in the United States conforms to the
3-1
specification for grade B. Silicomanganese is sold in small pieces of fairly uniform sizes. A
typical piece of silicomanganese is 3 inches by ¼ inch.1
Silicomanganese is consumed in bulk form primarily by the steel industry as a source of
both silicon and manganese, although some silicomanganese is used as an alloying agent in the
production of iron castings. Manganese, intentionally present in nearly all steels, is used as a
steel desulfurizer and deoxidizer. By removing sulfur from steel, manganese prevents the steel
from becoming brittle during the hot rolling process. In addition, manganese increases the
strength and hardness of steel. Silicon is used as a deoxidizer, aiding in making steels of uniform
chemistry and mechanical properties. As such, it is not retained in the steel, but forms silicon
oxide, which separates from the steel as a component of the slag. As an alloying agent, silicon
increases the hardness and strength of hot‐rolled steel mill products, and enhances the toughness,
corrosion resistance, and magnetic and electrical properties of certain steel mill products.
Use depends upon the steelmaking practices of a given producer. Silicomanganese may
be introduced directly into the steelmaking furnace or added as a chemistry addition/deoxidizer
to molten steel at a separate ladle metallurgy station. As a furnace addition, it is typically used in
lump sizes and melted along with other steelmaking raw materials; as a ladle addition,
silicomanganese is used in smaller sizes. Silicomanganese is mostly consumed by electric
furnace steelmakers in the production of long products, including bars and structural shapes. This
use in long products may be due to less restrictive specifications for silicon for these products
than for flat‐rolled carbon steel mill products, such as sheet and strip.
Silicomanganese is believed to account for only a small share of the total cost of end‐use
steel mill products. A low‐carbon grade of silicomanganese containing around 60 percent of
manganese with around 30 percent of silicon and less than 0.10 percent carbon is also available
and is used primarily in the production of stainless steel, not in the applications of the more
common standard grade silicomanganese. Low‐carbon silicomanganese is not a subject product
in these reviews. Low‐carbon silicomanganese is produced by upgrading standard grade material
by the addition of silicon wastes from the ferrosilicon industry. It is produced primarily in
Norway by a firm related to the Eramet Group, one of the firms affected by this final rule.
1 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation
Nos. 731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at
http://www.usitc.gov/publications/701_731/4424.pdf.
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3.2 Manufacturing Process
Silicomanganese is produced by smelting together in a submerged arc furnace sources of
silicon, manganese, iron, and a carbonaceous reducing agent, usually coke. The reducing agent
and the other items are combined in a “charge” (which may include wood chips, dolomite, and a
fluxing agent) and electrically heated. Impurities from the ore or other manganese sources are
released and form slag, which rises to the top of the furnace and floats on top of the molten
silicomanganese. Following smelting, molten metal and slag are removed or “tapped” from the
furnace. The molten silicomanganese is poured into large molds (called “chills”), where it cools
and hardens. Once the alloy has hardened, the chills are emptied and the alloy is crushed into
small pieces and screened to fairly uniform sizes.
Eramet Marietta, Inc. is located in Marietta, OH and is wholly‐owned by Eramet Holding
Manganese of France. Prior to July 1999, the Marietta, OH, facility was operated by Elkem
Metals Co. In July 1999, Eramet SA of France purchased the production facility in Marietta, OH,
which included all of Elkem Metals Co.’s silicomanganese assets, from Elkem S/A, and created
the U.S. company Eramet Marietta, Inc. From 2002 to 2005, Highlander Alloys, LLC
(“Highlander”), attempted to produce silicomanganese at a silicon and silicon alloy facility in
New Haven, WV, but was beset by a number of problems ranging from financial woes, service
cutoffs, strikes by unpaid workers, and production difficulties resulting in only sporadic
production of silicomanganese. Domestic producer Eramet produces silicomanganese at a plant
in Marietta, OH, that it purchased in July 1999 from Elkem. Eramet also produces other
manganese ferroalloys as well as other alloying agents at that plant. Silicomanganese is
manufactured in the same or similar facilities as those used to produce high carbon
ferromanganese, although switching from one grade or type of manganese ferroalloy to another
involves costs in terms of lost production, reduced productivity, or possible contamination of the
higher grade product.
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Organizational Structure
Currently, the Eramet Marietta site is one of 11 subsidiaries of Eramet Group’s
Manganese division, with other facilities in this division including mining and metallurgical
business segments operating in twenty countries across five continents (Eramet Marietta, 2015).
.
Inputs and Outputs
According to the website of Eramet Marietta (2012), the Marietta facility acquired
manganese ore via barge from sister company Eramet Comilog, which operates a mine in Gabon,
Africa. This ore is refined into either ferromanganese or silicomanganese. The finished product
is shipped to the company’s customers, which “are primarily steel companies – most of which
are located within a 500-mile radius of the facility” (Eramet Marietta, 2012).
Revenue and Employment
Revenue data for Eramet Marietta is available in Hoover’s, but it is proprietary.2 Yahoo
Finance (2008) estimates the company’s 2008 employment at 365, while Dun and Bradstreet
(2011a) list 2009 employment as 240. Eramet Marietta has recently stated that there are 188
full-time equivalent direct employees at its facility as of December 31, 2014 (Eramet Marietta,
2015).
Felman Production, LLC
Felman Production, LLC has been operating on the West Virginia side of the Ohio River
since 2006 in a facility built in 1952 (Felman Trading, 2012). Felman Production, Inc. became a
limited liability corporation (LLC) in 2012. This plant has 256 employees when operating at full
production. The union representing the Felman employees is the United Steelworkers Union and
at full production the plant operates 24 hours per day and 7 days per week.
2 Based on download of data from Hoover’s, http://www.hoovers.com, on March 14, 2014.
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Organizational Structure
Felman Production, LLC is a foreign-owned and privately-held company. The company
is a wholly owned subsidiary of Georgian American Alloys Corp. Also, according to the U.S.
Geological Survey (2010), Georgian American Alloys Corp. is owned by Ukraine’s Privat
Group. A document from the U.S. District Court for the Southern District of West Virginia
sheds more light on the ownership of the company. In a 2011 memorandum regarding an
insurance claim made by Felman Production, the court reported that “Felman is 100% owned by
Haftseek Investments Limited, which is 100% owned by Divot Enterprises, Ltd., the stock of
which is 100% owned by Igor Kolomoiskiy” who is described as “one of three shareholders of
Privat Bank” (U.S. District Court for the Southern District of West Virginia [USDC SDWV],
2011). The memorandum also specifies that the Privat entity “is intimately related to Felman
and its operations” (USDC SDWV, 2011).
Felman Production, LLC also has close ties with Felman Trading, Inc., which is “an
exclusive distributor of ferroalloys produced by its relative company Felman Production, Inc.”
This entity is the trading arm for Felman Production and is responsible for selling and delivering
ferroalloy products produced by the company.
Inputs and Outputs
While it is unclear where the mined ore comes from, sale and delivery of finished
products is entirely done by Felman Trading, Inc. The goods are sold to “metallurgical
consumers in North, Central, and South Americas” (Felman Trading, 2012). Felman sells their
product through its sister company, Felman Trading, Inc. (which is based in Miami, FL) to
various steelmakers such as AK Steel, Nucor, Gerdau Ameristeel, and Timken to name a few. In
addition to the plant near New Haven, West Virginia, Felman Trading also handles the output of
U.S.-based CC Metals and Alloys and five plants in the Black Sea region, including three plants
in Ukraine, one plant in Romania, and one plant in Georgia.
Revenue, Employment and Other Economic Data
According to Manta, Inc. in 2012, Felman Production, Inc. parent company had $27.7
million in sales. Other measures of revenue were either largely inaccurate or undisclosed.
In an EPA inspection report dated March 19, 2012, the company describes its profit
margins as “extremely tight and dependent on, among other factors, the price of manganese ore
and the market price for silicomanganese, which varies considerably (e.g., between October 2011
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and March 2012, the market price for silicomanganese fluctuated between $900 and $1200 per
ton).”3 The same inspection report also indicated that at this time, Felman is considering shutting
down the facility in the next 2-3 years if the capital and operating costs associated with new and
proposed air emissions control requirements make silicomanganese production in West Virginia
uneconomical. However, if the facility is able to obtain the required air permits, the plant
manager did say that there was the possibility of Felman installing an additional 1-2 furnace(s) in
the plant (which may be accompanied by a shutdown of 1-2 of the existing furnaces). This would
be a 30 million dollar (per furnace) investment in the facility. The plant’s Title V permit was
revised on March 12, 2012 in order for the Company to install and operate a pelletizer, extruder
and crusher for material handling purposes.4
More recently, Felman’s chief financial officer, Barry Nuss, testified before the West
Virginia Public Services Commission that Felman Production, LLC incurred losses in 2011 and
2012, and that “it is not logical to assume that the shareholder of Felman Production will
continue to operate a high cost, unprofitable operation if it has an alternative to do otherwise.” 5
Within the United States, the electrometallurgical ferroalloy manufacturing industry is
composed of two facilities located about 80 miles apart in the Ohio River Valley. Eramet
Marietta, the larger of the two, is located in the town of Marietta, within Washington County,
Ohio; the other manufacturer, Felman Production LLC, is located near New Haven, within
Mason County, West Virginia.
Today, there are two ferroalloys production facilities that are subject to the supplemental
proposal. No new ferroalloys production facilities have been built in over 20 years, and we
anticipate no new ferroalloys production facilities in the foreseeable future, although one facility
is currently exploring expanding operations.
In general, little difference appears to exist between the production processes in the
domestic industry and those used abroad to produce silicomanganese. This fact reflects the
maturity of the industry, and may be attributed to the diffusion of process technology,
3 Memorandum from U.S. EPA, Region III. Report for Inspection of Felman Production, Inc. plant in Letart, West
Virginia. March 19, 2012. Redacted version. 4 Memorandum from U.S. EPA, Region III. Report for Inspection of Felman Production, Inc. plant in Letart, West
Virginia. March 19, 2012. Redacted version. 5 Public Service Commission of West Virginia. Redacted Rebutal testimony of Barry Nuss on behalf of Felman
Production, LLC. Case No. 13-1325-E-PC. November 26, 2013, p. 6.
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techniques, and equipment on a world‐wide basis; the similarity of steelmaking techniques; and
the commonality of steel recipes.
Most silicomanganese is sold directly to the end user, steel producers, for use as a
deoxidizer in the production of steel. It is mostly used in production of long products (rods, bars,
and sections) in electric arc furnace mini‐mills, which have increased their share of raw steel
production in the United States. Silicomanganese is also used, although to a lesser extent, in steel
plate production. Demand for silicomanganese follows the trends of the steel industries as well
as overall economic conditions. Purchasers of silicomanganese reported that their main
customers are foundries and steel mills.
Based on available information, U.S. silicomanganese producers have the ability to
respond to changes in demand with moderate changes in the quantity of shipments of U.S.
produced silicomanganese to the U.S. market. The main contributing factors to the moderate
degree of responsiveness of supply are the availability of unused capacity, some ability to use
inventories to increase shipments, and the ability to produce alternate products.
Based on available information, overall U.S. demand for silicomanganese is likely to
experience small changes in response to changes in price. Silicomanganese accounts for a very
small share of the total cost of its end uses. Apparent U.S. consumption of silicomanganese, by
quantity, decreased during 2007‐09 and increased during 2010‐12.
Purchasers in the U.S. reported that silicomanganese accounted for 1 percent of the total
cost of steel produced in integrated mills and less than 3 percent of costs for steel produced with
electric arc furnaces.
Most firms reported that U.S. demand for silicomanganese since 2007 decreased or
fluctuated considerably. Most firms attributed the decreases or fluctuations in demand to the
overall condition of the economy and the decline in steel production. Several firms specifically
cited the recession in 2009 as causing a decrease in demand for silicomanganese due to the
decrease in construction activity and associated decline in demand for steel.
Firms’ responses to a US ITC survey regarding future demand for silicomanganese were
mixed. One‐half of responding importers expect U.S. demand for silicomanganese to fluctuate,
while others anticipate that demand will increase or not change. Purchasers who expect demand
for silicomanganese to change reported that it will fluctuate, and most foreign producers
anticipate U.S demand for silicomanganese to increase. Most firms attributed these changes to
economic recovery and changing demand for steel.
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Both responding U.S. producers reported that the silicomanganese market subject to
business cycles or conditions of competition distinctive to silicomanganese, and most responding
importers (8 of 12) reported that silicomanganese is subject to business cycles or conditions of
competition distinctive to silicomanganese. Firms reported that demand for silicomanganese
tracks certain industry demand, such as construction, which heavily impacts the demand for
steel.
3.3 Substitute Products and Related Issues
Both domestic producers, 9 of 12 importers, 6 of 13 purchasers, and 2 of 5 foreign
producers reported to the U.S. ITC that high‐carbon ferromanganese and ferrosilicon could be
substituted for silicomanganese in steel production. Almost all responding firms reported that the
substitutes for silicomanganese have not changed since 2007, and that they do not anticipate
changes in the future.
Six of nine importers and four of seven purchasers reported that the price of identified
substitutes affected the price of silicomanganese and reported that firms will switch to substitute
products if the price for silicomanganese is too high.
It should be noted that the two domestic producers also import substantial amounts of the
ferroalloys that they also produce. This interesting facet of domestic ferroalloy operations
should be noted in examination of the industry.6
3.3.1 Substitutability Issues
The degree of substitution between domestic and imported silicomanganese depends
upon such factors as relative prices, quality (e.g., levels of silicon and manganese, levels of other
chemicals, consistency, and lump size), and conditions of sale (e.g., discounts, lead times,
payment terms, etc.). Based on available data, US International Trade Commission (ITC) staff
indicate in a report that there is a moderate‐to‐high degree of substitutability between
domestically produced silicomanganese and silicomanganese produced outside of the U.S.
6 U.S. International Trade Commission. Silicomanganese from Brazil, China, and Ukraine. Investigation No. 731-
TA-671-673 (Third Review). September 5, 2012. Washington, D.C. p. 159.
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3.4 Elasticity Estimates
3.4.1 U.S. Supply Elasticity
The domestic supply elasticity for silicomanganese measures the sensitivity of the
quantity supplied by U.S. producers to changes in the U.S. market price of silicomanganese. The
elasticity of domestic supply depends on several factors including the level of excess capacity,
the ease with which producers can alter capacity, producers’ ability to shift to production of other
products, the existence of inventories, and the availability of alternate markets for U.S. produced
silicomanganese. Earlier analysis of these factors indicates that the U.S. industry has a moderate
ability to increase or decrease shipments to the U.S. market given a price change. The US ITC
estimates that the supply elasticity is between 5 to 7.
3.4.2 U.S. Demand Elasticity
The U.S. demand elasticity for silicomanganese measures the sensitivity of the overall
quantity demanded to a change in the U.S. market price of silicomanganese. This estimate
depends on factors discussed earlier such as the existence, availability, and commercial viability
of substitute products, as well as the component share of the silicomanganese in the production
of any downstream products. Based on the available information, the US ITC estimates the
demand elasticity for silicomanganese is likely to be in the range of ‐0.4 to ‐0.7.
3.4.3 Substitution Elasticity
The elasticity of substitution depends upon the extent of product differentiation between
the domestic and imported products. Product differentiation, in turn, depends upon such factors
as quality (e.g., chemistry, appearance) and conditions of sale (e.g., availability, sales terms,
discounts). Based on available information, the US ITC estimates the elasticity of substitution
between U.S.‐produced silicomanganese and subject imported silicomanganese is likely to be in
the range of 3 to 6.7
7 The substitution elasticity measures the responsiveness of the relative U.S. consumption levels of
the subject imports and the domestic like products to changes in their relative prices. This reflects how
easily purchasers switch from the U.S. product to the subject products (or vice versa) when prices
change.
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3.5 Raw Material and Electricity Costs
Silicomanganese prices are related to the costs of raw materials and tend to follow similar
trends. Raw materials used in the production of silicomanganese include manganese ore, silica,
coke, and electricity. U.S. producers reported that raw materials costs as a share of cost of goods
sold increased from 2007 to 2012. Raw materials as a share of cost of goods sold were slightly
higher in January‐March 2013 than in January‐March 2012. The primary raw materials used to
produce silicomanganese are manganese ore and/or high‐carbon ferromanganese slag. Felman
reported that it imports manganese ore from Australia, South Africa, and Gabon, and Eramet
reported sourcing manganese ore from Gabon and South Africa. Prices for manganese ore
increased from January 2007 to July 2008, then declined through 2008 and mid‐2009, and then
fluctuated through March 2013.
At a hearing before the ITC, representatives from Georgian American Alloys and Eramet stated
that electricity costs are also a significant cost in producing silicomanganese. A representative
from Georgian American Alloys added that electricity accounts for approximately 25 percent of
their total cost of production and is their second most costly input in producing silicomanganese.
Eramet Marietta has recently stated that “the delivered cost of electricity has a significant impact
on the Marietta [Ohio] Facility’s cost of production and its ability to compete domestically,
internationally and within its own corporate structure,” and that the “local delivered price of
electricity is the main source of competitive advantage or disadvantage for any ferromanganese
alloy producer,” given the other major production costs are set in international markets (Eramet
Marietta, 2015).
3.6 Current operations at U.S. Ferroalloy Producers
On June 28, 2013, Felman announced that it had ceased operations at its New Haven,
West Virginia facility for three months. In the next “two months,” Felman intended to reevaluate
market conditions to determine whether operations will resume earlier or if the plant will remain
closed for additional time. At a hearing for the US ITC, a representative from Felman explained
that both the current silicomanganese market conditions and planned maintenance at the facility
were factors in deciding to shutdown for three months. In its posthearing brief, Felman further
explained that it is committed to producing silicomanganese in the United States as evidenced by
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its significant investment in maintenance for its facility and its retention of all employees during
the shutdown.8
In the summer of 2013, Felman officials asked the West Virginia Public Services
Commission (PSC) for a special power rate on the electricity it uses for production in order to
reduce its cost of production and remain competitive with other ferroalloy producers worldwide.
The PSC decided to grant Felman’s request in early April, 2014. On June 30, 2014, Felman
Production signed a contract with their power provider, Appalachian Power Co. (a subsidiary of
American Electric Power, AEP) that includes a special power rate. In a press release issued that
day, Felman officials indicated the facility will be restarted for production by the end of July,
2014. On July 1, 2014, Felman officials, through their parent company (Georgian-American
Alloys, Inc.) indicated two of the three furnaces onsite will be restarted by the end of July.9
Those furnaces were restarted and operated into early 2015.
The Eramet facility in Marietta, OH will continue to produce silicomanganese and
ferromanganese in 2014, according to a spokesperson for the facility interviewed on January 17,
2014. 10 While production at this facility continued in 2014, the Agency is aware that Eramet
Marietta, Inc. requested on January 22, 2015 that the Public Utilities Commission (PUC) of Ohio
grant a reduction in their electric power rate from their power provider. Part of the reason for
this request is to better afford the compliance costs associated with this final rule, which are
estimated by Eramet Marietta to be $25,000,000 in capital investment.11 If this request is granted,
then the likelihood that the facility will continue to operate and experience lower economic
impacts after implementation of the final rule than estimated in this report appears higher given
that electricity is a relatively large portion of the production costs at the facility. A decision on
this request is expected in late spring.
8 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation Nos.
731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at
http://www.usitc.gov/publications/701_731/4424.pdf. P. III-2. 9 Press release from Georgian-American Alloys, Inc., July 1, 2014. Available on the Internet at
http://www.gaalloys.com/index.php/news/press-releases/34-news/press-releases/225-felman-production-to-restart-one-furnace-effective-immediately.
10 “Eramet continues making silicomanganese/ferromanganese in Ohio.” Published by Platts News. Downloaded
from the Internet on January 22, 2014 at http://www.platts.com/latest-news/metals/louisville-kentucky/eramet-
continues-making-silicomanganes/ferromanganese.
11 Application by Eramet Marietta, Inc. to Amend Reasonable Arrangement. Case No. 09-516-EL-AEC. Submitted
to the Public Utilities Commission of Ohio. January 22, 2015, p.3. This application is available at
http://dis.puc.state.oh.us/TiffToPDf/A1001001A15A22B60221I33078.pdf . Redacted version. Requested power
rate discount is confidential.
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Below is additional economic and financial background information on the Eramet
Marietta plant.
Eramet Marietta
In February 2010, the plant completed the first two phases of a plant security and
rerouting project aimed at making the plant and its facilities more secure and changing traffic
routes to improve production efficiencies and employee safety.
"This project was the first real infrastructure overhaul the plant saw in several decades
and it was desperately needed to improve our efficiencies and to further secure our plant in the
wake of our indefinite idling of our North Side facilities due to the economic downturn," said
Willoughby.
In May 2010, Eramet Marietta performed the "first tap" on its rebuilt Furnace 12, the
capstone of a $12 million renovation project aimed at improving and adding flexibility to the
furnace's production capabilities while improving its environmental performance and safety.
The project received the 2011 Initiative Award from the plant's corporate parent, The Eramet
Group, a prestigious recognition presented to the top projects completed in the organization,
which employs over 17,000 people worldwide, Willoughby said.
In early 2011, Eramet Marietta connected a $10 million baghouse emissions abatement
system to Furnace 1, completing the project started in 2008.
"These investments made in our plant by our parent company indicate their belief that
Eramet Marietta is an important operation in their portfolio," Willoughby said. "Each project is
a testament to the hard work and dedication of our employees, and our commitment to continue
to remain competitive in our field and a good corporate citizen here in the Mid-Ohio Valley."12
Willoughby said 2012 is ushering in more progress at the Eramet Marietta plant. Last
year, the company received final approvals from its parent company for an estimated $10.2
12 It should be noted that Eramet Marietta indicated that its plant was not subsidized by its parent company, Eramet
Group, in a comment on the proposed rule (“NERA, Final Report, Prepared on behalf of Eramet Marietta,
Incorporated. “Technical Comments on the Regulatory Impact Analysis Supporting EPA’s Proposed Rule for
Hazardous Air Pollutants from Ferroalloys Production (76 FR 72508).” January 31, 2012. pp. 6-7). The
relevant quote is “In the case of EMI, EMI has advised us that EMI’s parent does not subsidize EMI, and
therefore, any investment would need to be self-financed on the basis of EMI’s ability to operate profitably in the
future while absorbing the higher compliance costs imposed by the Proposed Rule.”
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million overhaul of its outdated mixhouse/raw material handling department. The mixhouse
project should be completed sometime in 2013.
Additionally, early in 2012 Eramet learned that it received financing for a water service
project that will provide water from the Ohio River to Eramet Marietta as well as several other
companies along Ohio Highway 7. The company, which uses river water as part of a closed
loop process that cools its furnaces, took the lead on the project when AMP-Ohio, which used
to provide the service water to several facilities in the area, announced its closure.
3.7 National Defense Stockpile for Raw Materials
The U.S. Department of Defense (DOD) has maintained a stockpile of raw materials,
known as the National Defense Stockpile (NDS), deemed essential for purposes of national
security since World War II. The NDS is a stockpile inventory of strategic materials built and
held to sustain the defense and essential civilian industrial base of the United States in the event
of a national emergency. It is held in reserve; inventories can only be released subject to certain
congressional and Presidential authorities. Ferromanganese has long been considered an
essential raw material since it is an important input to steel production, and steel is a key
component for ordinance, tanks, and other military equipment. Eramet Marietta and other parties
have expressed concerns in comments that one impact of this final rule could be the reduction in
the domestic supply of ferromanganese for military purposes, and increased reliance on
ferromanganese from countries that may not be friendly to US military interests. Information
from the US Geological Survey’s Mineral Summaries 2014 suggests, however, than there is
considerable ferromanganese available for purchase from the NDS. Of the 91,000 tons of
ferromanganese available for disposal from the NDS in Fiscal Year 2013, only 2,000 tons were
sold or disposed of. There were 347,000 tons available for disposal, thus indicating that there
appears to be sufficient quantities of ferromanganese from the NDS for use by the US DOD, and
for purchase by Eramet Marietta.13 The Strategic and Critical Report 2013 on Stockpile
Requirements prepared by DOD concluded that no shortfalls in ferromanganese were anticipated
to meet military and civilian demand for every scenario analyzed in the report.14 In addition, no
13 U.S. Geological Survey. 2014 Mineral Commodity Summaries. p. 101. Available at
http://minerals.usgs.gov/minerals/pubs/mcs/2014/mcs2014.pdf. 14 U.S. Department of Defense, Defense Logistics Agency. Strategic and Critical Materials 2013 Report of
Stockpile Requirements. January 2013. Available at
http://www.strategicmaterials.dla.mil/Report%20Library/2013%20NDS%20Requirements%20Report.pdf.
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one from the DOD has participated in the Interagency Review of the supplemental proposal and,
before that, the Interagency Review of the 2011 ferroalloys proposal.
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SECTION 4
BASELINE EMISSIONS, EMISSION REDUCTIONS, AND COSTS
4.1 Introduction
This section presents the baseline emissions for the pollutants emitted by affected units, the
resulting emissions after imposition of the final rule and the costs from reducing emissions as a result of
the final rule. We present the baseline emissions and emission reductions for HAP including mercury
and for other emissions affected such as PM2.5. Emission reductions were calculated from the baseline
emissions based on the final emissions limits.
4.2 Summary Of Cost Estimates And Emissions Reductions For The Regulatory Options
Considered
Regulatory options were considered for control of emissions of particulate matter (PM) metal
HAP (e.g., Mn, Ni, Cd), Mercury (Hg), organic HAP, and Polycyclic Aromatic Hydrocarbons (PAH)
from furnace stacks, and metal HAP from product sizing stacks and fugitive sources.
Emissions of each pollutant vary considerably among facilities, and multiple control options are
available for different groups of pollutants. Because of this, and the limited number of facilities in the
source category (two), specific regulatory options were assessed for each facility based on both
technology review and modeled risk. Because of differences in modeled risk and existing controls, some
options were not considered for all process lines at all facilities. Emissions reductions were estimated
for each facility based on emissions data received in an information collection request (ICR) sent to the
industry and based on interactions with officials from each facility.
A brief description of the options selected for the final revisions to the NESHAP and the
associated costs and emissions reductions for each facility in the source category are summarized in
Table 4-1. A more detailed description of all the regulatory options considered and their associated cost
and emissions reductions estimates are presented in the cost memoranda for this final rule.
The emissions reductions associated with the control options are calculated as the difference
between baseline emissions and the estimated emissions for each control scenario. Details of the
methodology employed to calculate these emissions are included in a separate memorandum. All costs
are estimated in 2012 dollars. The impacts for Option 1, the option to apply enhanced fugitive
emissions capture, is shown by plant and in total, and the same is true for Option 2, the option to apply
full building enclosure. Option 1 is in the final rule, and Option 2 is not. The HAP emission reductions
estimated for this final rule are 77 tons of metal HAP. PM emissions in this chapter refer to total PM.
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Of the 229 tons of total PM reduced, 48 tons are PM2.5 since approximately 21 percent of the total PM is
in the fine PM fraction.
4-2
Table 4-1: Summary of the Estimated Costs and Emissions Reductions of Fugitive HAP Regulatory Options Considered for the Final
Rule
Costs Emission Reductions Cost Effectiveness Incremental Cost Effectiveness
Compliance Option Facility
Total Capital
Cost ($)
Total Annual 1Cost ($/yr)
PM
Reduction
(Tons)
PM2.5
2Reduction
(Tons)
HAP
Reduction 3(Tons)
Cost
Effectiveness
($/Ton PM)
Cost
Effectiveness
($/Ton PM2.5)
Cost
Effectiveness
($/lb HAP)
Incremental
Cost
Effectiveness
($/Ton PM)
Incremental
Cost
Effectiveness
($/Ton PM2.5)
Incremental
Cost
Effectiveness
($/lb HAP)
Option 1: Enhanced
Fugitive Capture
Eramet $25,147,000 $5,343,095 147 31 61 $36,660 $174,573 $43
Felman $14,627,782 $1,853,325 83 17 16 $22,251 $105,955 $58
Total $39,774,782 $7,196,420 230 48 77 $31,420 $149,619 $46
Option 2: Building
Ventilation
4Eramet $33,154,302 $13,670,228 157 33 65 $87,072 $414,626 $105 $832,713 $3,965,301 $1,171 5Felman $28,228,603 $5,042,545 97 20 19 $52,214 $248,637 $134 $240,123 $1,143,441 $561
Total $61,382,905 $18,712,773 254 53 84 $73,796 $351,408 $112 $494,654 $2,355,496 $900 1
Annual cost calculated using 7% interest and a 20-year equipment l ife. 2 PM2.5 estimated to be approximately 21% of total PM, based on analysis performed by EPA's National Environmental Investigati on Center of TSP da ta col lected in the Marietta area by Ohio EPA and ATSDR duri ng 2007-8. 3 HAP reduction estimates assume Eramet Furnaces #1 and #12 both produci ng si l icomanganese 50% of the ti me, FeMn 50% of the ti me. 4 Eramet Bui ldi ng Venti lation cos ts provided by Eramet Marietta Inc, in their comments on the proposed rule: "Engineering Review of Proposed Ferroal l oy NESHAP Requi rements for Eramet Marietta Inc.", EPA-HQ-OAR-2010-0895-0106.
Emissions and costs reflect the assumption that bui ldi ng ventilation wil l not be required for Eramet bui lding #18. 5 Felman building ventilation cost estimate provi ded by Felman Production Inc, in their comments on the proposed rule: "Buildi ng Ventilation Cos ts Janua ry 30, 2012", EPA-HQ-OAR-2010-0895-0073
*Final Option.
4-3
4.3 Regulatory Options Considered For the Final Rule
This section provides a detailed description of all regulatory options that were considered for the
Ferroalloys NESHAP and their associated costs and emissions reductions.
4.3.1 Furnace Stack Emissions – Metal HAP
This section provides a detailed description of regulatory options under the final rule for fugitive
HAP emissions for the Ferroalloys NESHAP and their associated costs and emissions reductions.
4.3.2 Furnace Stack Emissions Control Options
These impacts for the regulatory options were calculated for existing units only, as no new
facilities are expected to become operational within the next 5 years. The methodology used to estimate
the costs are provided in the costs memorandum17 for the 2014 supplemental proposal. The emissions
estimates (baseline and enhanced capture) for this source category are discussed in the modeling
emissions memorandum.18
For the 2014 supplemental proposal, the EPA considered two options for reducing fugitive
emissions from the ferroalloys process; Option 1 includes enhanced local capture and roofline
ventilation for both facilities. Option 2 reflects full building enclosure with negative pressure for both
facilities. The cost estimates for Option 1 contained in Table 1 of this memorandum represent controls
likely to be installed as a result of facility-specific ventilation analyses, the controls likely to be needed
to address risk, and existing capture and control systems at the facilities. These estimates were based on
cost estimates supplied by the facilities after discussions with EPA regarding the standards being
considered, and incorporating their best estimates of the improvements to fugitive emission capture and
control they would implement to achieve “enhanced” capture”. The cost estimates for Option 2 are
based on revised analyses that were conducted after considering comments, information and data
submitted by the facilities in response to EPA’s November 2011 proposal.19,20
17 Memorandum from Jeff Harris and Bradley Nelson, EC/R to Phil Mulrine, U.S. Environmental Protection Agency,
OAQPS/SPPD/MICG, Cost Impacts of Control Options Considered for the Ferroalloys Production NESHAP to Address
Fugitive HAP Emissions, August 13, 2014. 18 Memorandum from Bradley Nelson, EC/R Inc. to Phil Mulrine, EPA OAQPS/SPPD/MMG, Revised Development of the
Risk and Technology Review (RTR) Emissions Dataset for the Ferroalloys Production Source Category for the 2015
Final Rule, April 21, 2015. 19 Eramet: "Engineering Review of Proposed Ferroalloy NESHAP Requirements for Eramet Marietta Inc.", EPA-HQ-OAR-
2010-0895-0106. 20 Felman: "Building Ventilation Costs January 30, 2012", EPA-HQ-OAR-2010-0895-0073.
4-4
4.3.2.1 Option 1: Enhanced Local Capture
As previously mentioned, design of a local ventilation system begins with a detailed
analysis of specific localized parameters (e.g., building volume, process locations, and airflow)
leading to development of a site-specific local ventilation plan and installation of custom hoods
and ventilation equipment. Such a system might rely on a variety of specific ventilation systems.
Installed systems may include the following:
Curtains or doors surrounding furnace tops to contain fugitive emissions,
Improvements to hoods collecting tapping emissions,
Upgraded fans to improve the airflow of fabric filters controlling fugitive
emissions,
Addition of “Secondary Capture”, or additional hoods to capture emissions from
tapping platforms or crucibles,
Addition of fugitive capture for casting operations,
Addition of additional fabric filters where necessary, and
Addition of rooftop ventilation, in which fugitive emissions escaping local control
are collected in the roof canopy over process areas through addition of partitions,
then directed through roof vents and ducts to control systems.
For the purposes of this analysis, it has been assumed that enhanced fugitive capture and
control systems and roofline ventilation will be installed for all operational furnaces at both
facilities, and for MOR operations at Eramet Marietta. The specific elements of the capture and
control systems selected for each facility are based directly on information supplied by the
facilities incorporating their best estimates of the improvements to fugitive emission capture and
control they would implement to achieve the standards to be included in the supplemental
proposal.
4-5
4.3.2.2 Option 2: Full Building Enclosure
Details of Option 2 (building ventilation) remain the same as in EPA’s November 2011
proposal. This control option involves installation of full building ventilation at negative pressure
for furnace buildings instead of installing fugitive controls on individual tapping and casting
operations. This option would require installation of ductwork from the roof vents of furnace
buildings, structural repairs to buildings, and a new fabric filter for each building. For emissions
modeling and cost estimation purposes we assumed that building ventilation would be required
for buildings containing furnaces, (i.e., Eramet buildings #1 and #12, and the melt shop building
at Felman).
4.4 Methodology For Estimating Control Costs
The following sections present the methodologies used to estimate the costs associated
with the regulatory options considered in the revised NESHAP for the Ferroalloys Production
source category.
4.4.1 Option 1 – Enhanced Fugitive Capture
Fugitive emissions of metal HAP at Ferroalloys Production facilities result from several
areas of the process. Process fugitive emissions primarily result from furnace leaks and
incomplete capture of emissions during tapping and casting of product. Furnace upsets can result
in release of emissions that would normally be contained by negative pressure occurring inside
furnace hood. Process fugitive emissions can also result from incomplete capture of emissions by
tapping hoods, or from casting operations, some of which are uncontrolled.
Both facilities employ negative-pressure hoods to collect emissions from tapping
operations and direct them to a control device. Some casting operations at both facilities capture
emissions and direct them to a fabric filter, while some casting operations are currently
uncontrolled.
As previously mentioned, design of a local ventilation system begins with a detailed
analysis of specific localized parameters (e.g., building volume, process locations, and airflow)
leading to development of a site-specific local ventilation plan and installation of custom hoods
and ventilation equipment. Both facilities which will be subject to the NESHAP have performed
preliminary analyses to assess the measures that they are likely to need to take to comply with
4-6
EPA’s potential requirements, and have submitted cost estimates to EPA based on their analyses.
Attachments 1 and 2 of the fugitive emissions cost memo contain copies of the cost estimates
provided by the facilities.
Costs were estimated for enhanced process fugitive control including roofline ventilation,
as described in the fugitive emissions cost memo. Details of the methodology employed to
estimate these costs follow.
4.4.1.1 General Considerations
A variety of potential enhancements to local ventilation and control of fugitive emissions
may be used by the facilities depending on their individual situation. Specific enhancements for
each facility were selected for cost estimation based on estimates directly provided by the
facilities based on their own engineering analyses and discussions with EPA. Analyses and cost
estimates provided by the facilities were given precedence where they were available. In
addition, the following general considerations apply to all estimated costs for process fugitives:
Annualized costs assume a 20-year life expectancy for the installed control devices
and other equipment and, to be consistent with OMB Guidance in Circular A-4, a 7-
percent cost of capital as an estimate of the annualized capital cost.
Costs provided by the facility were assumed to be in current dollars. All other costs
for this estimate were adjusted to 2012 dollars using Chemical Engineering Plant Cost
Indices (CEPCI1) where necessary.
Downtime associated with installation was not directly included in in cost estimates.2
Costs were not included for items noted by the facilities as currently being in place.
4.4.1.2 Facility-Specific Considerations
The following facility-specific considerations also apply:
Felman Production provided two general cost estimate scenarios:
1 CEPCI values employed: 584.6 for 2012, 521.9 for 2009, and 359.2 for 1993. For more information, see
http://www.chengonline.com. 2 Eramet Marietta provided costs for downtime associated with installation, while Felman did not. These costs were
significant, but because these costs were declared to be confidential by Eramet, they were considered by EPA,
but not directly included in these analyses.
4-7
o The first assumes a scenario in which one of their three furnaces is not in
operation and its fabric filter are used to provide roofline ventilation for the
other two furnaces, and
o The second assumes all three furnaces are operational with the addition of a
new fabric filter for roofline ventilation.
Estimated costs for Felman represent the second scenario. This scenario was
selected to be in line with modeled emissions, which are based on the assumption
that all three furnaces are operational.
Because Felman Production did not provide detailed estimated costs for the additional
fabric filter included in the second scenario, total installed capital cost and annual
costs for the fabric filter were estimated using EPA’s Integrated Planning Model
(IPM) for Particulate Control Cost Development3, with additional costs for ductwork
estimated using EPA’s Air Pollution Control Cost Manual.4 The estimated cost for
this fabric filter is significantly higher than Felman Production’s brief estimate of the
difference between the two cost scenarios, but the higher estimate has been retained
to be conservative. Details of these cost estimates are included in Attachment 3 of the
fugitive emissions cost memorandum.
Eramet’s cost estimate assumed capital costs of about $7.3 million for addition of
“Scrubber upgrades OR dust collector” for Furnace #12. Adding proportional
amounts of the associated installation and engineering costs results in total capital
costs of approximately $12.5 million for upgrades to the control device for Furnace
#12. Furnace #12 currently is equipped with 2 venturi scrubbers used to control
fugitive emissions from the furnace and tapping. The scrubbers are designed to
handle approximately 127,000 acfm each and the average flow rate from the current
capture configuration is 171,000 acfm, or roughly 67% of the estimated capacity of
the scrubbers. Assuming that the enhanced capture system which Eramet has
proposed for Furnace 12 (increased tapping capture and roof line ventilation) would
increase the required airflow over current levels by 50 to 100% (i.e., to a total of
256,000 to 342,000 acfm), the low end of the estimated range would put them very
near the maximum capacity of the current controls in place. Accordingly, it seems
reasonable to assume that additional control capacity will be required, whether in the
form of upgrades to the scrubber(s) or their replacement with a fabric filter.
3 Sargent & Lundy, IPM Model - Revisions to Cost and Performance for APC Technologies, Particulate Control
Cost Development Methodology Final, March 2011. 4 http://epa.gov/ttn/catc/products.html#cccinfo
4-8
4.4.2 Option 2 – Building Ventilation
As described in Sections 2 and 3, EPA proposed the full building enclosure option in the
November 2011 proposal. However, EPA received significant comments saying that EPA had
substantially underestimated the cost. Both Eramet and Felman provided extensive comments
regarding implementation of building ventilation, including cost estimates based on their own
engineering analyses. Analyses and cost estimates provided by the facilities have been given
precedence in developing new cost estimates. In addition, the following facility-specific
considerations apply to estimated costs for building ventilation:
Felman’s cost estimate applied overhead and contingency adjustments to ductwork costs
twice (once in the ductwork cost calculations by Chu & Gassman, and again in the costs
prepared by Lan Associates). Our cost estimate corrects this. For consistency with the
overhead adjustments used in preparation of the two sections of Felman's overall cost
estimate, we have calculated the Total Capital Investment (TCI) for the fabric filter as
2.17*Purchased Equipment Cost (PEC), and for ductwork as TCI=1.41*PEC. Details of
the revised cost estimate for Felman are included in Attachment 4 of the cost memo.
Eramet’s cost estimate included costs for installation of building ventilation for building
#18. For consistency with the option contained in the 2011 proposal, and with modeled
emissions, our cost estimate only assumes building ventilation is installed for buildings
#1 and #12. Only the “Building 1” and “Building 12” costs from Eramet’s cost estimate are included.
4.5 Mercury Control Options
4.5.1 Background
The raw materials used to produce ferroalloys contain trace amounts of mercury, which is
emitted during the smelting process. These mercury emissions are derived primarily from the
manganese ore, although there may be trace amounts in the coke or coal used in the smelting
process. The mercury emissions can exist in three forms: elemental, oxidized, and as a
particulate. While some of the mercury in particulate and oxidized forms is captured by the
particulate control devices, the more volatile elemental mercury is largely emitted to the
atmosphere. Control technologies used to reduce mercury emissions from combustion sources
have been used with success on other sources. The most highly advanced technology, activated
carbon injection (ACI) has been used on facilities that burn municipal solid waste for the past
4-9
decade. This technology uses particles of activated carbon to capture the mercury in the exhaust
gas stream. This is achieved by injecting the activated carbon into the exit gas flow, downstream
from the combustion source. The mercury attaches to the activated carbon particles, and it is
removed in a particulate control device. This control technology is expected to achieve up to
90% removal of mercury from the exhaust stream, and it was selected as the control technology
that would be used to reduce mercury emissions from the furnace smelting process at ferroalloy
production facilities under two of the three options described below.
4.5.2 Methodology for Estimating Costs of Mercury Reductions at Ferroalloy Facilities
The impacts of reducing mercury emissions from the furnace smelting process at
ferroalloys production facilities are based on the costs and emission reductions achieved through
the retrofit of ACI. This section summarizes the methodology and estimates the capital cost,
annual cost, and expected mercury emission reduction of retrofitting ACI on the furnaces at
Eramet and Felman.
Capital and Annual Costs
The capital and annual costs of retrofitting ACI on ferroalloy furnaces were estimated
using ACI cost algorithms5 developed for the Mercury and Air Toxics Standards (MATS). The
total capital investment (TCI) equation uses exhaust gas flow rate and carbon injection rate as
variables to scale the cost of retrofitting ACI to the exhaust duct. The equation used for
estimating TCI for the retrofit of ACI in 2012 dollars is presented below:
���. � ��𝑪��𝑨��𝑰 = �, ���, ��� ∗ �. � ∗ (� ∗ 𝑨𝑪𝑰 ����𝒆��𝒕���
���. �
�𝒂𝒕𝒆)�.�� ∗
where;
Q = Volumetric flow rate of the exhaust gas in actual standard cubic feet per minute (acfm),
ACI Injection Rate = Estimated carbon injection rate (lb/MMacf), assumed 2.0 for furnaces
equipped with a fabric filter and 5.0 for furnaces equipped with a venturi scrubber,
1,350,000 = Cost constant for installing an ACI system,
1.2 = Retrofit factor,
4-10
5 Sargent & Lundy, IPM Model – Revisions to Cost and Performance for APC Technologies, Mercury Control Cost
Development, Final, March 2011.
4-11
584.6 = Chemical Engineering Price Cost Index for 2012,
521.9 = Chemical Engineering Plant Cost Index for 2009.
The TCI for the ACI algorithm include the costs for all of the equipment, installation,
buildings, foundations, electrical, and retrofit factor to address difficulty of installation. This cost
equation was used to estimate TCI for retrofitting ACI on each of the ferroalloy furnaces. It was
assumed that the retrofit would take place upstream from the existing control device for Furnaces
2, 5, and 7 at Felman and Furnace 12 at Eramet. For Furnace 1 at Eramet, it was assumed that a
polishing baghouse would be installed and the ACI would be installed after the existing
baghouse and prior to the newly installed polishing baghouse. The equation used to estimate the
TCI for adding a polishing baghouse with an air-to-cloth ratio of 6.0 in 2012 dollars is presented
below:
���. � ��𝑪��𝑭�� = ��� ∗ �. � ∗
���. �
��.�� ∗
where;
Q = Volumetric flow rate of the exhaust gas in actual standard cubic feet per minute (acfm),
1,350,000 = Cost constant for installing an ACI system,
1.2 = Retrofit factor
584.6 = Chemical Engineering Price Cost Index for 2012,
521.9 = Chemical Engineering Plant Cost Index for 2009.
To estimate the total project cost (TPC), expenses for engineering and construction
management (10% of TCI), labor adjustments (5% of TCI), and contractor profit and fees (5% of
TCI) were included.
Annual costs for operation of the ACI were broken into direct annual costs and indirect
annual costs. Direct annual costs included operating labor, administrative and supervisory labor,
maintenance and materials, amount of activated carbon injected, and the cost for disposal of the
captured carbon. Indirect annual costs consisted of overhead, property taxes, insurance,
administration, and capital recovery. Table 4-2 lists the assumptions used to calculate each of
these direct and indirect costs.
4-12
The capital recovery factor was calculated assuming a 20-year equipment life and a 7
percent interest rate. Additional cost data used for this estimate was obtained from a mercury
4-13
control cost document developed for coal-fired utility boilers6. This document provided the ACI
injection rate (2 lb/MMacf for fabric filter applications), non-hazardous waste disposal costs
($30/Ton), and cost for the ACI ($0.75/lb). A summary of the ACI costs and more details on
how these costs are estimated are provided in Appendix A of the mercury cost memorandum.7
Table 4-2. Activated Carbon Injection Model Annual Costs
Parameter Equation/Assumptions
Direct Annual Cost ($/yr)
1 Additional
1Operating Labor = $0
2 Supervisory Labor = 0.03 * (Operating Labor + 40% of Maintenance Costs)
3 Maintenance = 0.005 * TCI for ACI/Retrofit Factor
4 Activated Carbon = (ACI Injection rate, lb/MMacf)*(Exhaust Flow Rate, acf/min)
*(MMacf/106 acf)*(60 min/hr)*(8760 hr/yr)*($0.75/lb)
5 Dust Disposal
= (ACI Injection rate, lb/MMacf)*(Exhaust Flow Rate, acf/min)
*(MMacf/106 acf)*0.99*(60 min/hr)*(8760 hr/yr)*(Ton/2000 lb)
*($40/Ton)
Indirect Annual Cost ($/yr)
1 Overhead = 0.6 * (Labor + Maintenance)
2
Property taxes,
insurance, and
administration
= 0.04 * TCI
3 Capital Recovery = CRF * TCI
1 It was assumed that no additional operating labor is needed to operate the ACI.
6 Sargent & Lundy, IPM Model - Revisions to Cost and Performance for APC Technologies, Mercury Control Cost
Development Methodology Final, March 2011. 7 Memo from Bradley Nelson, EC/R Inc. to Phil Mulrine, US EPA. Revised Mercury Control Options for the
Ferroalloys Production Industry. April, 2015.
4-14
Baseline Mercury Emissions
Emissions data have been re-calculated incorporating newly provided test data8,9,10
received prior to and after the publication of the 2014 supplemental proposal. This additional test
data was received from one of the facilities, and provides additional HAP data for some
pollutants at previously tested emission sources, including Hg data from each of the operational
furnaces at a single facility, one furnace producing Ferromanganese (FeMn) and the other
producing Silicomanganese (SiMn), and additional PM data from from one furnace at one of the
facilities.
To estimate the reductions in mercury emissions that would be achieved under Option 2,
first we calculated the estimated baseline annual mercury emissions during the production of
FeMn. These baseline emissions for FeMn production for Option 2 were calculated using test
data from Furnaces 1 and 12 at Eramet during FeMn production. Baseline emissions for Option
2 were not calculated for Felman, because they produce only SiMn in each of their three
furnaces. For each of the furnaces at Eramet, the average mercury emissions rate in pounds per
hour (lb/hr) from the test data during FeMn production was multiplied by 4,380 hours per year
(i.e., 50% annual production of FeMn).
Cost and Emissions Impacts
A summary of the impacts for each of the Mercury Control Options are presented in
Table 4-3. The impacts for Control Option 1, the option that is included in the final rule, were
calculated to be zero. These impacts are based on the assumption that the facilities would be
able to meet the mercury limits with their current furnace controls.
The impacts for Control Option 2 are based on the installation of ACI on Furnace 1 and
12 at Eramet with operation only during the production of FeMn, and a polishing baghouse on
Furnace 1. The emissions and annual cost for this option are based on the assumption that both
8 "Emission Measurement Summary Report Furnace No. 12 Scrubber PAHs and Mercury Eramet Marietta Inc.
Marietta, OH", January 2013, Available in the docket, EPA-HQ-OAR-2010-0895. 9 "Polycyclic Aromatic Hydrocarbons and Mercury Emission Summary Report EAF No. 12 Scrubber EAF No. 1
Baghouse Eramet Marietta Inc. Marietta, OH", November 2014, Available in the docket, EPA-HQ-OAR-2010-
0895. 10 "Emission Measurement Summary Report Filterable Particulate Matter Furnaces 1 and 12 Eramet Marietta, Inc.
Marietta, Ohio", April 2014, Available in the docket, EPA-HQ-OAR-2010-0895.
4-15
furnaces produce FeMn 50 percent annually (or 4,380 hours per year).11 The mercury reduction
is assumed to be 90 percent for the installation of ACI and the polishing baghouse on Furnace 1
at Eramet, and 50 percent for installation of ACI and the existing scrubber on Furnace 12 at
Eramet.
The impacts for Control Option 3 were calculated assuming that all of the furnaces at
Eramet and Felman would install and operate ACI during FeMn and SiMn production. Again,
the assumption is that ACI would be installed downstream from the Furnace 1 baghouse and a
second polishing baghouse would be added. The emissions and annual cost for this option are
based on the assumption that both furnaces at Eramet produce 50 percent annually (or 4,380
hours per year) of FeMn and 50 percent annually of SiMn. The furnaces at Felman are assumed
to produce SiMn only. The mercury reduction is assumed to be 90 percent for the installation of
ACI and the polishing baghouse on Furnace 1, and 50 percent for installation of ACI and the
existing scrubber on Furnace 12 at Eramet. The mercury reduction for ACI installed with the
existing baghouses at Felman is assumed to be 90 percent.
A breakdown of the individual furnace emission reductions and the capital and annual
costs for Options 2 and 3, the beyond the MACT floor options analyzes, are provided in Tables
4-4 and 4-5. The spreadsheet calculation sheet with the control cost algorithms are provided in
Appendix A of the mercury control cost memorandum for Options 2 and 3.12
Table 4-3. Summary of the Updated Estimated Emissions Reductions and Cost Impacts
for the Mercury Control Options Considered for Existing Furnaces
Mercury Control
Option
Hg Emission
Reductions
(lb/yr)
Total Capital
Cost ($2012)
Total Annual
Cost ($/year)
Cost
Effectiveness
($/lb)
Option 1 – MACT
Floor for FeMn and
SiMn Production
0 $0 $0 -----
263 $30,195,970 $3,361,901 $12,769
11 Cost effectiveness varies significantly with the percentage of FeMn production. As shown in Table 2-2, the
Option 1 cost effectiveness for Eramet EAF 1 at 50% FeMn production is approximately $13,600/lb Hg. For the
same furnace producing 100% FeMn, the cost effectiveness would be approximately $7,100/lb Hg. 12 Memo from Bradley Nelson, EC/R Inc. to Phil Mulrine, US EPA. Revised Mercury Control Options for the
Ferroalloys Production Industry. April, 2015.
4-16
Option 2 – Beyond-the-
floor for FeMn
Production and MACT
Floor for SiMn
Production
Option 3 – Beyond-the-
floor for FeMn and
SiMn Production
328.6 $41,681,907 $6,872,764 $20,911
Table 4-4. Summary of Updated Mercury Cost Effectiveness for Control Option 2
(Beyond-the-floor Mercury Control for Furnaces Producing FeMn Only)
Cost Parameter
Eramet EAF 1
Cost ($2012)
Eramet EAF
12 Cost
($2012) Total Eramet
Existing FF w/
ACI & New
Polishing FF
ACI w/
Existing
Venturi
Scrubber
Cost ($2012)1
2Polishing Baghouse Capital Cost $14,659,265 $0 $14,659,265
2Activated Carbon Injection Capital Cost $3,184,766 $3,625,211 $6,809,977
3Other Installation Capital Cost $7,974,497 $752,231 $8,726,729
Total Capital Cost $25,818,528 $4,377,442 $30,195,970
Direct Annual Cost ($/yr)4
Indirect Annual Cost ($/yr)5
Total Annual Cost ($/yr)
$217,476
$2,334,447
$2,551,924
$318,449
$491,529
$809,977
$535,925
$2,825,976
$3,361,901
Mercury Emission Rate (lb/yr)
Mercury Emission Reduction w/ ACI (lb/yr)6
Mercury Cost Effectiveness ($/lb)
208.6
187.7
$13,595
151.1
75.6
$10,718
359.7
263.3
$12,769
1 Mercury Control Option 1 includes: Eramet EAF 1 - adding ACI and polishing FF to existing EAF #1 w/ FF,
Eramet EAF 12 - adding ACI to existing EAF #12 w/ VS. 2 ACI and BH costs developed using capital and annual cost algorithms from the IPM Model - Revisions to Cost
and Performance for APC Technologies, Mercury Control Cost Development Methodology, March 2011. 3 Other installation capital costs include: engineering and construction management, construction labor
adjustment, and contractor profit & fees.
4-17
4 Direct annual costs include: operating labor, administrative and supervisory labor, maintenance labor and
materials, activated carbon, and non-hazardous dust disposal for Eramet. 5 Indirect annual costs include: overhead, property tax, insurance, administration, and capital recovery (20 years
@ 7% interest). 6 Assumes 90% mercury reduction for FF and 50% mercury reduction with a VS.
Table 4-5. Summary of Updated Mercury Cost Effectiveness for Control Option 3
(Beyond-the-floor Mercury Control for Furnaces Producing FeMn and SiMn)
Cost Parameter
Felman Furnace 2
Cost ($2012)
Felman Furnace 5
Cost ($2012)
Felman Furnace 7
Cost ($2012) Total Felman Cost
($2012)1
Eramet EAF 1 Cost
($2012)
Eramet EAF 12
Cost ($2012) Total Eramet Cost
($2012)1
ACI w/ Existing
Fabric Filter
ACI w/ Existing
Fabric Filter
ACI w/ Existing
Fabric Filter
Existing FF w/ ACI
& New Polishing FF
ACI w/ Existing
Venturi Scrubber
2Polishing Baghous e Capital Cost
2Acti vated Carbon Injecti on Capital Cost
3Other Installation Capital Cost
Tota l Capital Cost
$0
$3,320,988
$689,105
$4,010,093
$0
$3,069,015
$636,821
$3,705,836
$0
$3,122,161
$647,848
$3,770,009
$0 $14,659,265
$3,184,766
$7,974,497
$25,818,528
$0
$3,625,211
$752,231
$4,377,442
$14,659,265
$9,512,164 $6,809,977
$1,973,774 $8,726,729
$11,485,937 $30,195,970
Direct Annua l Cost ($/yr)4
Indirect Annua l Cost ($/yr)5
Tota l Annua l Cost ($/yr)
$653,379
$451,132
$1,104,511
$513,562
$417,674
$931,236
$737,893
$424,731
$1,162,624
$1,904,834 $314,092
$2,334,447
$2,648,540
$534,324
$491,529
$1,025,853
$848,417
$1,293,537 $2,825,976
$3,198,371 $3,674,393
Mercury Emi ssion Rate (lb/yr)6
Mercury Emi ssion Reducti on w/ ACI (lb/yr)7
Mercury Cost Effecti venes s ($/l b)
21.5
19.3
$57,143
4.39
3.95
$235,763
8.93
8.03
$144,717
34.8 238.3
214.4
$12,351
165.8
82.9
$12,373
404.1
31.3 297.3
$102,143 $12,357
1 Mercury Control Opti on 1 includes : Eramet EAF 1 - adding ACI and poli shing FF to existing EAF #1 w/ FF, Eramet EAF 12 - adding ACI to existing EAF #12 w/ VS. 2 ACI and BH costs devel oped using capital and annua l cost algori thms from the IPM Model - Revi sions to Cost and Performa nce for APC Technol ogies, Mercury Control Cost Devel opment
Methodol ogy, March 2011. 3 Other instal lation capi tal costs include: engi neeri ng and cons tructi on management, cons tructi on labor adjustment, and contra ctor profi t & fees . 4 Direct annua l costs include: opera ting labor, admi nistrative and supervi sory labor, maintena nce labor and materi als, activated carbon, and non-ha zardous dust disposal. 5 Indirect annua l costs include: overhea d, property tax, insurance, admi nistration, and capital recovery (20 years @ 7% interes t). 6 Eramet mercury enha nced capture emi ssions based on 50/50 producti on of FeMn and SiMn. Felman mercury enha nced capture emi ssions based on 100% producti on of SiMn. 7 Assumes 90% mercury reducti on for FF and 50% mercury reducti on with a VS.
4.6 Costs of Digital Opacity Compliance System (DOCS)
A compliance monitoring option that will be required in the final rule is the use of a
Digital Opacity Compliance System (DOCS). The DOCS translates images from an imaging
digital camera into visual plume opacity measurements using computer software, and is proposed
as an alternate reporting method to EPA Method 9 (see Preliminary Method 008). Currently the
American Society for Testing and Materials (ASTM) has approved a method for the use of the
DOCS (see ASTM D7520-09). The form of the standard under this option includes an opacity
limit of 8 percent with the use of a digital camera opacity system (DOCS) to comply with the
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enhanced fugitive capture and control systems. The costs for the DOCS were updated based on
new cost information from the vendor. The one-time or capital cost for setting up the DOCS was
estimated to be $4,900 per source, and includes the cost of 2 cameras to be set up to read from
the single roof vent to cover sun angle during different times of the day, mounts, cables,
computer and accessories, and training.13 Eramet Marietta is assumed to need 3 DOCS and
Felman is assumed to need 1 DOCS.
The annual cost of operating the system per source was estimated to be $32,300 for
weekly monitoring and $16,300 for monthly monitoring. The annual DOCS costs assume
weekly monitoring for 26 weeks and monthly monitoring thereafter. The annual cost includes the
costs for the software license, analyzing 90 minutes of opacity per monitoring event , and
quarterly reporting of results. Thus, the capital cost of DOCS for Felman Production’s facility
will be $4,900, and the annual costs will be $24,300. For the Eramet Marietta facility, the capital
costs will be $14,700 and the annual costs will be $72,900. All costs are in 2012 dollars.
As explained in the final rule FR notice, EPA is also considering the possibility of
including a provision in the rule whereby if a facility achieves DOCS readings over an extended
period of time that are well below the opacity limit then that facility may be able to reduce the
frequency of such readings and therefore the annual operating costs would also decrease
accordingly.
4.7 Costs of Bag Leak Detectors (BLS)
The baghouse systems used to control emissions from the furnaces are required to be
outfitted with a bag leak detection system (BLS) to ensure proper operation of a baghouse. The
capital cost for BLS was estimated to be $269,148 per affected facility with an annual cost of
$219,078. Thus, the capital cost for BLS for Eramet Marietta and Felman is $269,148, and the
annual cost of BLS for each facility is $219,078. All costs are in 2012 dollars.
13 Memo from Brad Nelson, EC/R Inc. to Phil Mulrine, US EPA/OAQPS. Final Cost Impacts of Control Options
Considered for the Ferroalloys Production NESHAP to Address Fugitive HAP Emissions. May
21, 2015.
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4.8 Summary of Total Cost of Final Rule by Facility
Table 4-5 summarizes estimated costs for each facility in the Ferroalloys source category,
assuming implementation of the final requirements, including the use of DCOS and installation
of BLS, for reduction of process fugitive HAP emissions. As shown in Table 4-5, the total
capital costs of the rule are $40.3 million and the total annualized costs are $7.7 million (2012
dollars).
Table 4-5: Summary Cost Estimates of Implementation of the Final Rule by Facility*
Facility Control System Capital Cost ($) Annual Cost ($)
Eramet
Enhanced Capture System $25,147,000 $5,343,095
DOCS $14,700 $72,900
BLS $269,148 $219,078
Total Facility Cost $25,430,848 $5,635,073
Felman
Enhanced Capture System $14,627,782 $1,853,325
DOCS $4,900 $24,300
BLS $269,148 $219,078
Total Facility Cost $14,901,830 $2,096,703
Total Industry Cost $40,332,678 $7,731,776
* Costs are in 2012 dollars. As stated previously, the cost of mercury control and control of
PAH in the final rule is zero.
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SECTION 5
ECONOMIC IMPACT ANALYSIS AND STATUTORY AND EXECUTIVE ORDER
ANALYSES
5.1 Background
In this chapter, we present the results of the economic impact analysis and analyses
prepared in adherence to statutory and Executive Order requirements.
5.2 Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a
regulatory flexibility analysis of any rule subject to notice and comment rulemaking
requirements under the Administrative Procedure Act or any other statute unless the agency
certifies that the rule will not have a significant economic impact on a substantial number of
small entities. Small entities include small businesses, small organizations, and small
governmental jurisdictions.
For purposes of assessing the impacts of this rule on small entities, small entity is defined
as: (1) a small business as defined by the Small Business Administration’s (SBA) regulations at
13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county,
town, school district or special district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise that is independently owned and operated and is
not dominant in its field. For this source category, which has the NAICS code 331110 (i.e., Iron
and Steel Mills and Ferroalloy manufacturing), the SBA small business size standard is 1,000
employees according to the SBA small business size standard definitions.1
After considering the economic impacts of today’s rule on small entities, I certify that
this final action will not have a significant economic impact on a substantial number of small
1 The SBA small business size standards can be found at
http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf. These standards are up to date as of July 14,
2014.
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entities (or SISNOSE). Neither of the companies affected by this rule is considered to be a small
entity per the definition provided in this section. Hence, there is no SISNOSE for this final rule.
5.3 Economic Impacts
This section of the economic impact analysis focuses on the impacts of the final rule to
the two affected ferroalloys producers in the US and to their consumers. We examine the
impacts of enhanced local capture (called Option 1) for reducing fugitive HAP emissions, and
the option for mercury reductions (called Option 1) on the affected facilities. In doing so, we
assume that each affected facility is entirely self-supporting; that is, the parent company for each
facility does not contribute any capital or other supporting funds to the operation of the facility.
This statement is consistent with statements made by Eramet Marietta Inc. in its comments on
the previous ferroalloys proposed NESHAP (January 29, 2012). Felman Production LLC,
which was known as Felman Production, Inc. prior to becoming an LLC in early 2012, made
similar statements in its comments on the earlier proposed rule (January 31, 2012). It should be
noted, however, that Eramet Group, a French conglomerate that is the parent company for
Eramet Marietta, Inc., has made substantial funds (>$100 million) available for several projects
over the last few years implemented at the Eramet Marietta facility, including installation of a
new baghouse, according to comments from its CEO in a local newspaper (March 8, 2012,
Parkersburg, WV News and Record, available on the Internet). Estimating the impacts on
affected facilities in such a way is a conservative estimate of impacts of the rule since any
support from the parent company should reduce impacts on an individual plant owned by the
company; thus, this level of estimate may overstate the calculated impacts of the final rule on
each facility provided in this report.
For this analysis of economic impacts, we apply microeconomic theory in a relatively
straightforward fashion. Markets are composed of people and organizations as consumers and
producers acting as economic agents to maximize utility or profits, respectively. One way
economists illustrate behavioral responses to pollution control costs is by using market supply
and demand diagrams. The market supply curve describes how much of a good or service firms
are willing and able to sell to people at a particular price; we often draw this curve as upward
sloping because some production resources are fixed. As a result, the cost of producing an
additional unit typically rises as more units are made. The market demand curve describes how
much of a good or service consumers are willing and able to buy at some price. Holding other
factors constant, the quantity demanded is assumed to fall when prices rise. In a perfectly
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competitive market, equilibrium price (P0) and quantity (Q0) are determined by the intersection
of the supply and demand curves (see Figure 5-1below). This approach is based on similar
economic impact approaches presented in the final CI and SI RICE NESHAP and the residential
wood heaters NSPS RIAs.2
Changes in Market Prices and Quantities
To qualitatively assess how the regulation may influence the equilibrium price and
quantity in the affected markets, we assumed the market supply function shifts up by the
additional cost of producing the good or service; the unit cost increase is typically calculated by
dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-1). As
shown, this model makes two predictions: the price of the affected goods and services are likely
to rise and the consumption/production levels are likely to fall.
The size of these changes depends on two factors: the size of the unit cost increase
(supply shift) and differences in how each side of the market (supply and demand) responds to
changes in price. Economists measure responses using the concept of price elasticity, which
represents the percentage change in quantity divided by the percentage change in price. This
dependence has been expressed in the following formula:3
Price Elasticity of Supply Share of per-unit cost
Price Elasticity of Supply - Price Elasticity of Demand)
As a general rule, a higher share of the per-unit cost increases will be passed on to
consumers in markets where:
- goods and services are necessities and people do not have good substitutes that they
can switch to easily (demand is inelastic) and
- suppliers have excess capacity and can easily adjust production levels at minimal
costs, or the time period of analysis is long enough that suppliers can change their
fixed resources; supply is more elastic over longer periods.
2 These RIAs are available on the Internet at http://www.epa.gov/ttn/ecas/ria.html. 3 For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–
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447, or Fullerton and Metcalf (2002).
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}
$
Price Increase
g P1
P0 f
e
S1 : With Regulation
h } Unit Cost Increase
S0 : Without Regulation
c d
b
a Q1 Q0 Output
consumer surplus = –[fghd + dhc]
producer surplus = [fghd − aehb] − bdc
total surplus = consumer surplus + producer surplus = −[aehb + dhc + bdc]
Figure 5-1. Market Demand and Supply Model: With and Without Regulation
Short-run demand elasticities for energy goods (electricity and natural gas), agricultural
products, and construction are often inelastic. Specific estimates of short-run demand elasticities
for these products can be obtained from existing literature. For the short-run demand of energy
products, the National Energy Modeling System (NEMS) buildings module uses values between
0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand. For the
short-run demand of agriculture and construction, EPA has estimated elasticities to be 0.2 for
agriculture and approximately 1 for construction. As a result, a 1% increase in the prices of
agriculture products would lead to a 0.2% decrease in demand for those products, while a 1%
increase in construction prices would lead to approximately a 1% decrease in demand for
construction. Given these demand elasticity scenarios, approximately a 1% increase in unit costs
would result in a price increase of 0.1 to 1%. As a result, 10 to 100% of the unit cost increase
could be passed on to consumers in the form of higher goods/services prices. This price increase
would correspond to a 0.1 to 0.8% decline in consumption in these markets.
For the ferroalloys RTR, we have elasticity data that will allow us to estimate potential
economic impacts for affected ferroalloy consumers and producers using the framework
described above. Data from a 2013 U.S. International Trade Commission report indicate that the
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price elasticity of demand for silicomanganese ranges from -0.4 to -0.7, and the price elasticity of
supply ranges from 5 to 7.4 Using the midpoint of these elasticity ranges and the equation shown
in the Appendix, the share of per-unit output cost is equal to 6/(6-(-0.55)) = 6/6.55 = 0.92. Thus,
based on this calculation and the explanation of its implications as discussed previously, a 1%
increase in per-unit cost yields a 0.92% reduction in demand for silicomanganese output.
To calculate the change in per-unit cost of silicomanganese associated with the
requirements of the final rule, we use the cost to sales estimate of impact to affected firms and
knowledge of the firm’s net income (or profits) to help estimate a proxy for the change in per-
unit output cost. According to the cost memos for this RTR, the annualized cost of all the
potential requirements for the Eramet Marietta firm (the subsidiary of the Eramet Group that
owns the affected facility in Ohio) is $5.64 million, which primarily includes the estimated costs
to reduce process fugitive manganese emissions.
Using the average of sales figures over the last two years, we construct an average annual
sales estimate of $303.8 million for use in this calculation.5 The annualized cost to sales estimate
is therefore 5.64/303.8 = 0.0186 or 1.86%. The cost to sales estimate reflects how much product
price will have to rise for a producer to have as much revenue as before for a given level of
output. This would be difficult for Eramet Marietta to accomplish, even partially, in that Eramet
is a price taker in the market for silicomanganese, which is a commodity traded on a worldwide
market. Also, we know from information provided verbally by consultants working on behalf of
Eramet Marietta that this facility experienced negative net income for the last two fiscal years. 6
We also recognize that an estimate of cost to sales exceeding the profit or net income margin
(i.e., profit or net income/unit of sales) for a facility is a circumstance that, if this continues,
could lead to the risk of a potential facility closure in the long term. This type of conclusion is
drawn from standard microeconomic theory and has been part of economic analyses for EPA
rulemakings, such as those for the final Lime Manufacturing NESHAP and for the proposed
Revisions to the Underground Storage Tank rulemaking.
4 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation
Nos. 731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at
http://www.usitc.gov/publications/701_731/4424.pdf. 5 Based on revenue data for Eramet Marietta taken from Hoovers, Inc. Data retrieved on March 14, 2014. 6 Verbal communication with staff from Policy Navigation Group, contractors for Eramet Marietta, Inc. March 12,
2014.
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Economic Impact Results
With net income as a measure of profit, and profit = revenues – production costs, we can
reasonably presume that the production costs at Eramet Marietta could be equal to or greater than
the revenue estimate above over the last two years. Thus, the per-unit output cost in production
resulting from the control requirements of the final rule at Eramet Marietta can be reasonably
estimated as equal to the annualized cost to sales estimate, which for this case is 1.86% shown
above. Given this per-unit output cost estimate, then the decline in output resulting from
imposition of the RTR is calculated to be 1.86*0.92 = 1.71%. However, this estimated decline in
production is before any consideration of the effect of imports, which is discussed below. Also,
the decline in output will change to the extent the per-unit output cost is higher or lower than that
estimated in this analysis.
Regarding the effect of the global market and imports in our analysis, the elasticity of
substitution between U.S. produced silicomanganese and imported silicomanganese ranges from
3 to 6.7 Thus, a 1% increase in price for U.S. produced silicomanganese could yield a 3 to 6%
increase in demand for imported silicomanganese and thus yield a corresponding decline in
demand for U.S. produced silicomanganese. This high elasticity of substitution indicates the
relative ease that consumers have to switch from U.S. produced silicomanganese to imported
silicomanganese compounds. The ease that consumers have to switch from U.S. produced
silicomanganese (from Eramet Marietta) will increase the decline in output estimated above.
Using a midpoint estimate of 4.5 for the elasticity of substitution between U.S. produced and
imported silicomanganese, an increase in price of 1.86% in silicomanganese produced in the
U.S. would yield a 1.86*4.5 = 8.4% increase in demand for imported silicomanganese. (Note:
Eramet Marietta also imports silicomanganese, so that may mitigate the substitution effect
between U.S. produced and imported silicomanganese to some extent). Nevertheless, assuming
the effects are entirely additive, which may yield an overestimates of economic impact, the
decline in output from Eramet Marietta resulting from the costs incurred from the RTR may be
as high as 1.71+ 8.4 = 10.1% or around a 10% decline in output. Thus, the effect of an increase
in silicomanganese price in the U.S. is not only a direct decline in silicomanganese output but
also a switch by consumers to imported (non-U.S.) silicomanganese, ceteris paribus.
7 Reference 1 in this report.
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If we required the beyond the MACT floor limits for mercury control for FeMn
production furnaces, the estimated annualized costs for Eramet Marietta increase from $5.6
million to $9.3 million. The overall cost impacts of this Option 2 for mercury (in addition to the
proposed controls for process fugitive emissions described above) can be calculated by the ratio
of these costs (i.e., 9.3/5.6 =1.65). Thus, the projected increase in price becomes 1.65* 1.86 =
3.07% from the direct effect of the costs. Likewise, the direct decrease in production would be
calculated to be 3.07% (before consideration of the effects of the global market and imports).
Regarding imports, using a midpoint estimate of 4.5 for the elasticity of substitution between
U.S. produced and imported silicomanganese (as described above) and assuming the elasticity of
substitution between U.S. produced and imported ferromanganese would be the same as for
silicomanganese, we calculate that an increase in price of 3.07% in ferromanganese produced in
the U.S. would yield a 3.07*4.5 = 13.8% increase in demand for imported ferromanganese.
Therefore, assuming additive of impacts, which may yield an overestimate of economic impacts,
the decrease in production of FeMn could be as high as about 17% (3.07 + 13.8 = 16.9%) at
Eramet when accounting for substitution from U.S. produced to imported FeMn. We lack
demand and supply elasticities information specifically for ferromanganese, but we believe it is
reasonable to assume that the elasticity of FeMn would be similar to SiMn given that this
ferroalloy is also a commodity with most of the same market characteristics and therefore we
believe the economic impacts for FeMn production would be similar in magnitude to those
calculated for SiMn production sources.
Assuming market conditions remain approximately the same, we believe Eramet Marietta
would not be able to sustain the costs of beyond-the-MACT floor mercury controls (in addition
to the fugitive control costs). This would likely result in substantial economic impacts to the
facility in the short-term and the potential for risk of closure in the longer-term.
Given the substantial economic impacts estimated in this analysis associated with the
emissions control when including the beyond the MACT floor option for mercury control in
addition to the costs for the control of process fugitive HAP metals emissions, as well as other
factors such as which HAP metals are being reduced and by how much, and the magnitude of the
total capital costs and annual costs, the Agency is finalizing emissions limits for mercury based
on the MACT floor level of mercury control as part of this rule.
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Caveats to the Economic Impact Analysis
Some important caveats to list for this analysis:
- We assume no earnings or net income is available to Eramet Marietta from previous
fiscal years to offset any losses experienced during the timeframe of this analysis
(2013 and 2014);
- We assume that no capital is supplied to Eramet Marietta by their parent company,
the Eramet Group, to support the subsidiary in complying with this RTR;
- We assume the demand and supply responsiveness of ferromanganese output from
Eramet Marietta is consistent with that for silicomanganese output.
- We assume that the impacts on price and output from changes in ferroalloy price and
effects from substitution of foreign-produced ferroalloys for domestically-producted
ferroalloys are additive.
Based on the costs to the industry shown in Section 4 for the controls for process fugitive
emissions (i.e., Option 1 shown in table 4-1), the supply and demand elasticities in Section 3 of
this report and the economic impact results presented earlier in Section 5, a price increase for
silicomanganese of up to 1.9 percent could potentially occur domestically, and an output
decrease of as much as 10.1 percent could potentially also occur. Given that both of these
producers of ferroalloys are also importers of the same alloys, the existence of ferromanganese in
relatively abundant quantity in the National Defense Stockpile, and Felman having its own
stockpile of silicomanganese, the importation of these alloys and the silicomanganese stockpile
could potentially mitigate these economic impacts to some extent.
One other note is that growth in the US steel industry should lead to growth in demand
for ferromanganese. Ferromanganese is a major input to steel production. U.S. steel
production is projected to increase by 4% from 2014 to 2015, with growth continuing up to 2018,
according to a study on the U.S. Industrial Outlook for 27 industries done by the Manufacturers
Alliance for Productivity and Innovation (MAPI) Foundation in Dec. 2014 (found at
https://www.mapi.net/research/publications/us-industrial-outlook-widespread-growth-ahead ).
With increases in steel production in the US, increases in US production should follow and thus
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lead to increases in domestic demand for ferromanganese. Any potential increase in
ferromanganese demand is not accounted for in the calculations above. The same is true for
silicomanganese demand.
5.4 Energy Impacts
Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare
and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of
Management and Budget, a Statement of Energy Effects for certain actions identified as
“significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy
actions” as any action by an agency (normally published in the Federal Register) that
promulgates or is expected to lead to the promulgation of a final rule or regulation, including
notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking:
(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order,
and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy;
or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs
as a significant energy action.
This final rule is not a significant energy action as designated by the Administrator of the
Office of Information and Regulatory Affairs because it is not likely to have a significant adverse
impact on the supply, distribution, or use of energy. This action will not create any new
requirements and therefore no additional costs for sources in the energy supply, distribution, or
use sectors.
5.5 Unfunded Mandates Reform Act
5.5.1 Future and Disproportionate Costs
The UMRA requires that we estimate, where accurate estimation is reasonably feasible,
future compliance costs imposed by the rule and any disproportionate budgetary effects. Our
estimates of the future compliance costs of the rule are discussed previously in this EIA. We do
not believe that there will be any disproportionate budgetary effects of the supplemental proposal
on any particular areas of the country, state or local governments, types of communities (e.g.,
urban, rural), or particular industry segments.
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5.5.2 Effects on the National Economy
The UMRA requires that we estimate the effect of the rule on the national economy. To
the extent feasible, we must estimate the effect on productivity, economic growth, full
employment, creation of productive jobs, and international competitiveness of U.S. goods and
services if we determine that accurate estimates are reasonably feasible and that such effect is
relevant and material. The nationwide economic impact of the rule is presented earlier in this
EIA. This analysis provides estimates of the effect of the rule on most of the categories
mentioned above, and these estimates are presented earlier in this EIA. The nature of this rule is
such that it is not practical for us to use existing approaches, such as the Morgenstern et al.
approach,8 or others to estimate the impact on employment to the regulated entities and others
from this final rule. In addition, we have determined that the final rule contains no regulatory
requirements that might significantly or uniquely affect small governments. Therefore, today’s
rule is not subject to the requirements of section 203 of the UMRA.
5.6 Executive Order 13045: Protection of Children from Environmental Health Risks
and Safety Risks
Executive Order 13045, “Protection of Children from Environmental Health Risks and
Safety Risks” (62 FR 19885, April 23, 1997), applies to any rule that (1) is determined to be
“economically significant,” as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, EPA must evaluate the
environmental health or safety effects of the planned rule on children and explain why the
planned regulation is preferable to other potentially effective and reasonably feasible alternatives
considered by the Agency.
This rule is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because
the Agency does not believe the environmental health risks or safety risks addressed by this
action present a disproportionate risk to children. The report, Analysis of Socio-Economic
Factors for Populations Living Near Ferroalloys Facilities, shows that on a nationwide basis,
there are approximately 26,000 people exposed to a cancer risk at or above 1-in-1 million and
approximately 28,000 people exposed to a chronic noncancer TOSHI greater than 1 due to
emissions from the source category. The percentages for the other demographic groups,
including children 18 years and younger, are similar to or lower than their respective nationwide
percentages. Further, implementation of the provisions included in this action is expected to
8 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. “Jobs versus the Environment: An Industry-Level
Perspective.” Journal of Environmental Economics and Management 43(3):412-436.
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significantly reduce the number of at-risk people due to HAP emissions from these sources (from
between 26,000 to 28,000 people to about 1,000), providing significant benefit to all the
demographic groups in the at-risk population.
This rule is expected to reduce environmental impacts for everyone, including children.
This action sets emissions limits at the levels based on MACT, as required by the Clean Air Act.
Based on our analysis, we believe that this rule does not have a disproportionate impact on
children.
5.7 Executive Order 12898: Federal Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations
Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy
on environmental justice. Its main provision directs federal agencies, to the greatest extent
practicable and permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and adverse human health or
environmental effects of their programs, policies, and activities on minority populations and low-
income populations in the United States.
For the final rule, the EPA has determined that the current health risks posed to anyone
by emissions from this source category are unacceptable. There are about 26,000 to 28,000
people nationwide that are currently subject to health risks which are non-negligible (i.e., cancer
risks greater than 1 in a million or chronic noncancer TOSHI greater than 1) due to emissions
from this source category. The demographic distribution of this “at-risk” population is similar or
below the national distribution of demographics for all groups except for the “ages 65 and up”
age group, which is 4 percent greater than its corresponding national percentage. The rule will
reduce the number of people in this at-risk group from 26,000 - 28,000 people to about 1,000
people, thereby providing disproportionate benefits to a greater percentage of minorities.
Therefore, the EPA has determined that the rule will not have disproportionately high and
adverse human health or environmental effects on minority or low-income populations because it
increases the level of environmental protection for all affected populations.
5.8 Employment Impact Analysis
EPA has analyzed the impacts of this rulemaking on employment, which are presented in
this section. While a standalone analysis of employment impacts is not included in a standard
cost-benefit analysis, such an analysis is of particular concern given the current interest in the
effect of environmental regulation on employment. . Executive Order 13563, states, “Our
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regulatory system must protect public health, welfare, safety, and our environment while
promoting economic growth, innovation, competitiveness, and job creation” (emphasis added). A
discussion of labor requirements associated with the installation, operation, and maintenance of
control requirements, as well as reporting and recordkeeping requirements is included in the cost
memoranda for this final rule. However, due to data and methodology limitations, we have not
quantified the rule’s effects on labor, or the effects induced by changes in workers’ incomes.
What follows is an overview of the various ways that environmental regulation can affect
employment. EPA continues to explore the relevant theoretical and empirical literature and to
seek public comments in order to ensure that the way EPA characterizes the employment effects
of its regulations is valid and informative.
This regulation is expected to affect employment in the United States through the
regulated sector – ferroalloy manufacturing. It is now an industry with only two facilities in the
U.S., but it provides an important source of employment to their locales – Washington County,
PA and Mason County, WV, respectively, as mentioned earlier in this report.
From an economic perspective labor is an input into producing goods and services; if a
regulation requires that more labor be used to produce a given amount of output, that additional
labor is reflected in an increase in the cost of production. Moreover, when the economy is at full
employment, we would not expect an environmental regulation to have an impact on overall
employment because labor is being shifted from one sector to another. On the other hand, in
periods of high unemployment, employment effects (both positive and negative) are possible.
For example, an increase in labor demand due to regulation may result in a short-term net
increase in overall employment as workers are hired by the regulated sector to help meet new
requirements (e.g., to install new equipment) or by the environmental protection sector to
produce new abatement capital resulting in hiring previously unemployed workers . When
significant numbers of workers are unemployed, the opportunity costs associated with displacing
jobs in other sectors are likely to be smaller. And, in general, if a regulation imposes high costs
and does not increase the demand for labor, it may lead to a decrease in employment. The
responsiveness of industry labor demand depends on how these forces all interact. Economic
theory indicates that the responsiveness of industry labor demand depends on a number of
factors: price elasticity of demand for the product, substitutability of other factors of production,
elasticity of supply of other factors of production, and labor’s share of total production costs.
Berman and Bui (2001) put this theory in the context of environmental regulation, and suggest
that, for example, if all firms in the industry are faced with the same compliance costs of
regulation and product demand is inelastic, then industry output may not change much at all.
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Regulations set in motion new orders for pollution control equipment and services. New
categories of employment have been created in the process of implementing environmental
regulations. When a regulation is promulgated, one typical response of industry is to order
pollution control equipment and services in order to comply with the regulation when it becomes
effective. On the other hand, the closure of plants that choose not to comply – and any changes
in production levels at plants choosing to comply and remain in operation - occur after the
compliance date, or earlier in anticipation of the compliance obligation. Environmental
regulation may increase revenue and employment in the environmental technology industry.
While these increases represent gains for that industry, they translate into costs to the regulated
industries required to install the equipment.
Environmental regulations support employment in many basic industries. Regulated firms
either hire workers to design and build pollution controls directly or purchase pollution control
devices from a third party for installation. Once the equipment is installed, regulated firms hire
workers to operate and maintain the pollution control equipment—much like they hire workers
to produce more output In addition to the increase in employment in the environmental
protection industry (via increased orders for pollution control equipment), environmental
regulations also support employment in industries that provide intermediate goods to the
environmental protection industry. The equipment manufacturers, in turn, order steel, tanks,
vessels, blowers, pumps, and chemicals to manufacture and install the equipment. Currently in
most cases there is no scientifically defensible way to generate sufficiently reliable estimates of
the employment impacts in these intermediate goods sectors.
5.8.1 Employment Impacts Within the Regulated Sector
It is sometimes claimed that new or more stringent environmental regulations raise
production costs thereby reducing production which in turn must lead to lower employment.
However, the peer-reviewed literature indicates that determining the direction of net employment
effects in a regulated industry is challenging due to competing effects. Environmental regulations
are assumed to raise production costs and thereby the cost of output, so we expect the “output”
effect of environmental regulation to be negative (higher prices lead to lower sales). On the other
hand, complying with the new or more stringent regulation requires additional inputs, including
labor, and may alter the relative proportions of labor and capital used by regulated firms in their
production processes. Two sets of researchers discussed here, Berman and Bui (2001) and
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Morgenstern, Pizer, and Shih (2002),9 demonstrate using standard neoclassical microeconomics
that environmental regulations have an ambiguous effect on employment in the regulated
sector.59 These theoretical results imply that the effect of environmental regulation on
employment in the regulated sector is an empirical question and both sets of authors tested their
models empirically using different methodologies. Both Berman and Bui and Morgenstern et al.
examine the effect of environmental regulations on employment and both find that overall they
had no significant net impact on employment in the sectors they examined.
Berman and Bui (2001) examine how an increase in local air quality regulation that
reduces NOx emissions affects manufacturing employment in the South Coast Air Quality
Management District (SCAQMD), which incorporates Los Angeles and its suburbs. During the
time frame of their study, 1979 to 1992, the SCAQMD enacted some of the country’s most
stringent air quality regulations, which were more stringent than federal and state regulations.
Using SCAQMD’s local air quality regulations, Berman and Bui identify the effect of
environmental regulations on net employment in the regulated industries.10,11 The authors find
that “while regulations do impose large costs, they have a limited effect on employment”
(Berman and Bui, 2001, p. 269). Their conclusion is that local air quality regulation “probably
increased labor demand slightly” but that “the employment effects of both compliance and
increased stringency are fairly precisely estimated zeros [emphasis added], even when exit and
dissuaded entry effects are included” (Berman and Bui, 2001, p. 269).12
Morgenstern et al. (2002) estimated the effects of pollution abatement expenditures on
net employment in four highly regulated sectors (pulp and paper, plastics, steel, and petroleum
refining). They conclude that increased abatement expenditures generally have not caused a
significant change in net employment in those sectors. While the specific sectors Morgenstern et
al. examined are different than the sectors considered here, the methodology that Morgenstern et
al. developed is still an informative way to qualitatively assess the effects of this rulemaking on
employment in the regulated sector.
9 Berman, E. and L. T. M. Bui (2001). “Environmental Regulation and Labor Demand: Evidence from the South
Coast Air Basin.” Journal of Public Economics 79(2): 265-295.
Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level
Perspective.‖ Journal of Environmental Economics and Management 43(3):412-436.
10 Note, like Morgenstern, Pizer, and Shih (2002), this study does not estimate the number of jobs created in the
environmental protection sector. 11 Berman and Bui include over 40 4-digit SIC industries in their sample. 12 Including the employment effect of exiting plants and plants dissuaded from opening will increase the estimated
impact of regulation on employment.
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While there is an extensive empirical, peer-reviewed literature analyzing the effect of
environmental regulations on various economic outcomes including productivity, investment,
competitiveness as well as environmental performance, there are only a few papers that examine
the impact of environmental regulation on employment, but this area of the literature has been
growing. As stated previously in this RIA section, empirical results from Berman and Bui (2001)
and Morgenstern et al (2002) suggest that new or more stringent environmental regulations do
not have a substantial impact on net employment (either negative or positive) in the regulated
sector. Nevertheless, other empirical research suggests that more highly regulated counties may
generate fewer jobs than less regulated ones (Greenstone 2002, Walker 2011). However, the
methodology used in these two studies cannot estimate whether aggregate employment is lower
or higher due to more stringent environmental regulation, it can only imply that relative
employment growth in some sectors differs between more and less regulated areas. List et al.
(2003) find some evidence that this type of geographic relocation, from more regulated areas to
less regulated areas may be occurring. Overall, the peer-reviewed literature does not contain
evidence that environmental regulation has a large impact on net employment (either negative or
positive) in the long run across the whole economy.
While the theoretical framework laid out by Berman and Bui (2001) and Morgenstern et
al. (2002) still holds for the industries affected under this final rule, important differences in the
markets and regulatory settings analyzed in their study and the setting presented here lead us to
conclude that it is inappropriate to utilize their quantitative estimates to estimate the employment
impacts from this regulation. In particular, the industries used in these two studies as well as the
timeframe (late 1970’s to early 1990’s) are quite different than those in this rule. For these
reasons we conclude there are too many uncertainties as to the transferability of the quantitative
estimates in these two studies to apply their estimates to quantify the employment impacts within
the regulated sectors for this regulation.
References for Employment Impacts
Greenstone, M. (2002). “The Impacts of Environmental Regulations on Industrial Activity: Evidence
from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures.” Journal of
Political Economy 110(6): 1175-1219.
List, J. A., D. L. Millimet, P. G. Fredriksson, and W. W. McHone (2003). “Effects of Environmental
Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator.” The
Review of Economics and Statistics 85(4): 944-952.
Walker, Reed. (2011). “Environmental Regulation and Labor Reallocation." American Economic
Review: Papers and Proceedings, 101(2
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SECTION 6
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United States Office of Air Quality Planning and Standards Publication No. EPA-452/R-15-004
Environmental Protection Health and Environmental Impacts Division May, 2015
Agency Research Triangle Park, NC
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